American Airlines, Inc. is in the process of re-pricing its 2016
credit facilities and its 2013 Citicorp credit facility. Fitch
Ratings has assigned a rating of 'BB+/RR1' to American's re-priced
2016 credit facilities. Fitch currently rates American's 2013
Citicorp credit facility 'BB+/RR1'.
KEY RATING DRIVERS
American is in the process of repricing two of its existing term
loans. The company's $970 million 2013 Citicorp term loan B-1 is
secured by slots at Washington Reagan, flight simulators, and
certain real estate, and matures in 2019. The $1 billion 2016 term
loan B is secured by the company's mainline spare parts and matures
in 2023. The re-pricing will not affect the key provisions or
maturity dates of either of the term loans.
The 'BB+/RR1' rating on each of the term loans is based on
Fitch's recovery analysis which reflects a scenario in which a
distressed enterprise value is allocated to the various debt
classes in a going-concern scenario. The 'RR1' Recovery Rating
reflects Fitch's belief that secured creditors would receive
superior recovery based on an estimate of American's distressed
enterprise value.
American's 'BB-' Issuer Default Rating (IDR) is supported by the
strong financial results that American has posted since its merger
with US Airways and concurrent emergence from bankruptcy. Fitch
expects continued solid financial results from American over the
intermediate term based on a stable domestic travel environment,
moderate fuel costs, and the benefits of the company's on-going
integration and fleet renewal processes.
The 'BB-' rating also incorporates the risks in American's
credit profile, including a significant debt balance and
expectations for leverage to be somewhat high for the rating over
the next two years, heavy upcoming capital requirements, and
shareholder focused cash deployment.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for American
include;
--Capacity growth in the low single digits through the forecast
period.
--Continued moderate economic growth in the U.S. over the near
term, translating into stable demand for air travel.
--Jet Fuel prices equating to roughly $55/barrel on average for
2017, increasing to approximately $65/barrel by the end of the
forecast period.
--Mid single digit RASM decline in 2016 followed by low growth
thereafter.
RATING SENSITIVITIES
Positive Rating Sensitivities for the corporate rating
include:
--Adjusted leverage sustained below 4x;
--Funds from operations (FFO) fixed charge coverage sustained
around 3x;
--Free cash flow generation above Fitch's base case
expectation;
--Further progress towards reaching joint collective bargaining
agreements with various labor groups.
Future actions that may individually or collectively cause Fitch
to take a negative rating action include:
--Adjusted debt/EBITDAR sustained above 4.5x;
--EBITDAR margins deteriorating into the low double-digit
range;
--Shareholder focused cash deployment at the expense of a
healthy balance sheet.
Fitch has assigned the following ratings;
American Airlines, Inc.
--Senior secured 2016 credit facility 'BB+/RR1'.
Fitch currently rates American as follows:
American Airlines Group Inc.
--Long-Term IDR 'BB-';
--Senior unsecured notes 'BB-/RR4'.
American Airlines, Inc.
--Long-Term IDR 'BB-';
--Senior secured credit facilities 'BB+/RR1'.
Additional information is available on www.fitchratings.com
Date of Relevant Committee: Dec. 4, 2015.
Summary of Financial Statement Adjustments
Fitch sets aside a certain amount of cash and revolver
availability as 'not readily available' to reflect a minimum amount
of cash that may be necessary for the company to carry on
day-to-day operations and is thus not immediately available for
things like debt payments or capital expenditures. Fitch estimates
this amount at roughly 10% of LTM revenue.
Applicable Criteria
Corporate Rating Methodology - Including Short-Term Ratings and
Parent and Subsidiary Linkage - Effective from 17 August 2015 to 27
September 2016 (pub. 17 Aug 2015)
https://www.fitchratings.com/site/re/869362
Rating Aircraft Enhanced Equipment Trust Certificates --
Effective 10/13/2015 to 5/12/2016 (pub. 13 Oct 2015)
https://www.fitchratings.com/site/re/871079
Additional Disclosures
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013468
Endorsement Policy
https://www.fitchratings.com/regulatory
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY
FOLLOWING THIS LINK:
HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN
ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS
ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT
WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES
ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.
FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED
ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON
THE FITCH WEBSITE.
Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and
its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone:
1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction
or retransmission in whole or in part is prohibited except by
permission. All rights reserved. In issuing and maintaining its
ratings and in making other reports (including forecast
information), Fitch relies on factual information it receives from
issuers and underwriters and from other sources Fitch believes to
be credible. Fitch conducts a reasonable investigation of the
factual information relied upon by it in accordance with its
ratings methodology, and obtains reasonable verification of that
information from independent sources, to the extent such sources
are available for a given security or in a given jurisdiction. The
manner of Fitch's factual investigation and the scope of the
third-party verification it obtains will vary depending on the
nature of the rated security and its issuer, the requirements and
practices in the jurisdiction in which the rated security is
offered and sold and/or the issuer is located, the availability and
nature of relevant public information, access to the management of
the issuer and its advisers, the availability of pre-existing
third-party verifications such as audit reports, agreed-upon
procedures letters, appraisals, actuarial reports, engineering
reports, legal opinions and other reports provided by third
parties, the availability of independent and competent third- party
verification sources with respect to the particular security or in
the particular jurisdiction of the issuer, and a variety of other
factors. Users of Fitch's ratings and reports should understand
that neither an enhanced factual investigation nor any third-party
verification can ensure that all of the information Fitch relies on
in connection with a rating or a report will be accurate and
complete. Ultimately, the issuer and its advisers are responsible
for the accuracy of the information they provide to Fitch and to
the market in offering documents and other reports. In issuing its
ratings and its reports, Fitch must rely on the work of experts,
including independent auditors with respect to financial statements
and attorneys with respect to legal and tax matters. Further,
ratings and forecasts of financial and other information are
inherently forward-looking and embody assumptions and predictions
about future events that by their nature cannot be verified as
facts. As a result, despite any verification of current facts,
ratings and forecasts can be affected by future events or
conditions that were not anticipated at the time a rating or
forecast was issued or affirmed.
The information in this report is provided "as is" without any
representation or warranty of any kind, and Fitch does not
represent or warrant that the report or any of its contents will
meet any of the requirements of a recipient of the report. A Fitch
rating is an opinion as to the creditworthiness of a security. This
opinion and reports made by Fitch are based on established criteria
and methodologies that Fitch is continuously evaluating and
updating. Therefore, ratings and reports are the collective work
product of Fitch and no individual, or group of individuals, is
solely responsible for a rating or a report. The rating does not
address the risk of loss due to risks other than credit risk,
unless such risk is specifically mentioned. Fitch is not engaged in
the offer or sale of any security. All Fitch reports have shared
authorship. Individuals identified in a Fitch report were involved
in, but are not solely responsible for, the opinions stated
therein. The individuals are named for contact purposes only. A
report providing a Fitch rating is neither a prospectus nor a
substitute for the information assembled, verified and presented to
investors by the issuer and its agents in connection with the sale
of the securities. Ratings may be changed or withdrawn at any time
for any reason in the sole discretion of Fitch. Fitch does not
provide investment advice of any sort. Ratings are not a
recommendation to buy, sell, or hold any security. Ratings do not
comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or
taxability of payments made in respect to any security. Fitch
receives fees from issuers, insurers, guarantors, other obligors,
and underwriters for rating securities. Such fees generally vary
from US$1,000 to US$750,000 (or the applicable currency equivalent)
per issue. In certain cases, Fitch will rate all or a number of
issues issued by a particular issuer, or insured or guaranteed by a
particular insurer or guarantor, for a single annual fee. Such fees
are expected to vary from US$10,000 to US$1,500,000 (or the
applicable currency equivalent). The assignment, publication, or
dissemination of a rating by Fitch shall not constitute a consent
by Fitch to use its name as an expert in connection with any
registration statement filed under the United States securities
laws, the Financial Services and Markets Act of 2000 of the United
Kingdom, or the securities laws of any particular jurisdiction. Due
to the relative efficiency of electronic publishing and
distribution, Fitch research may be available to electronic
subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch
Australia Pty Ltd holds an Australian financial services license
(AFS license no. 337123) which authorizes it to provide credit
ratings to wholesale clients only. Credit ratings information
published by Fitch is not intended to be used by persons who are
retail clients within the meaning of the Corporations Act 2001
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161020006662/en/
Fitch RatingsPrimary AnalystJoe Rohlena,
CFADirector+1-312-368-3112Fitch Ratings, Inc.70 W. Madison
StreetChicago, IL 60602orSecondary AnalystCraig D. FraserManaging
Director+1-212-908-0310orCommittee ChairpersonDavid PetersonSenior
Director+1-312-368-3177orMedia RelationsAlyssa Castelli, New York,
+1-212-908-0540alyssa.castelli@fitchratings.com