Rating Action: Moody's downgrades Virgin Australia to Ca from Caa1 on missed coupon payment
Sydney, May 18, 2020 -- Moody's Investors Service has today downgraded Virgin Australia Holdings Limited's
Corporate Family Rating to Ca from Caa1. Concurrently, Moody's has downgraded Virgin's senior unsecured
and backed senior unsecured ratings to C from Caa2, and its backed senior unsecured MTN program to (P)C
"IMPORTANT NOTICE: MOODY'S RATINGS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY
RETAIL INVESTORS. SUCH USE WOULD BE RECKLESS AND INAPPROPRIATE. SEE FULL
The outlook on the ratings has been changed to developing from ratings under review.
The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil
prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions
and markets. The combined credit effects of these developments are unprecedented. The airline sector has
been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and
sentiment. More specifically, the weaknesses in Virgin's credit profile, including its exposure to global demand
for travel, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. We
regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications
for public health and safety. Today's action reflects the impact on Virgin of the breadth and severity of the
shock, and the broad deterioration in credit quality it has triggered.
The rating action was prompted by Virgin missing the coupon payment on 15 May 2020 of its USD425 million
8.125% 2024 bonds, after entering into voluntary administration on 21 April 2020.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial
implications for public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Virgin is in voluntary administration and a number of potential bidders have expressed interest in purchasing
the airline. Additionally, the second creditors' meeting has been scheduled for 22 August 2020.
Any future change in rating will depend on the outcome of the voluntary administration process.
The principal methodology used in these ratings was Passenger Airline Industry published in April 2018 and
available at https://www.moodys.com/research/Passenger-Airline-Industry--PBC_1091811 . Alternatively,
please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Virgin Australia Holdings Limited, headquartered in Brisbane, is Australia's second largest airline following its
launch in 2000 and listing on the Australian Securities Exchange in 2003. As of fiscal 2019, it had generated
revenues of AUD5.8 billion and carried around 24.8 million passengers.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections
Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?
courtesy of Bell Direct
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