Fitch puts UAL ratings on positive rating watch after United agrees to buy Continental
By APMonday, May 3, 2010
Fitch puts UAL ratings on positive rating watch
SAN FRANCISCO — Fitch Ratings said Monday that it put the ratings it holds for UAL Corp. and its main operating unit, United Airlines Inc., on positive rating watch after United agreed to buy Continental Airlines Inc. in a $3 billion-plus deal that will create the world’s biggest carrier.
Fitch said the rating watch includes UAL’s and United’s “CCC” issuer default rating, United’s “B+/RR1″ secured bank credit facility rating and United’s “C/RR6″ senior unsecured rating.
Fitch said that the positive rating watch stems from its prediction that a combination of the two carriers will lead to improved margins, the generation of free cash flow and increased liquidity.
The ratings service said it could upgrade the issuer default rating to “B-” later this year or when the acquisition is finalized if UAL’s stand-alone free cash flow is consistently good and its debt levels decline.
Fitch also said that it will probably upgrade ratings for UAL and United to the “B-” level — matching the current issuer default rating for Continental — if integration issues related to the acquisition are ironed out and the resulting company’s operating outlook still seems positive at or before the deal closes.
