Guntars Vitols · 06.05.2024. · Comments (0)
Rating agencies just came out Fitch latest assessment. It’s worth reading, because these are not some MPs or other yiffs on TV. The rating agency is attracted by the company itself in connection with the planned debt refinancing – so that investors know what to expect. Gives access to financial data, answers questions and so on. Such as “audit”.
In the specific case, such an IDR was ordered (Issuer Default Rating). It describes the risk of how likely it is that the lender will take away at least part of the money. AirBaltic this rating is B minus. This means that the risk of not returning is significant, but there is also a marginal hope that one could return. Lending money to a company is a “highly speculative” transaction. I added the rating definition (first picture).
Next. The rating agency says that if the government intervenes with its financing, then it will be bad news – in fact, it will indicate the company’s inability to finance itself and the rating could potentially be further reduced. To the next level CCC, which means that the risk of default is very high.
This, of course, contradicts what the public hears in the media that the state will be able to earn.
If the company goes bankrupt – how much money will the lender pay? Not all, most likely. The news is positive there. It has a separate rating – the so-called recovery index. AirBaltic given RR3, which means that in the event of insolvency, 50-70% of the loaned money could be recovered (this does not include the hundreds of millions previously poured into the company, as they have already been fully 100% consumed/spent. We are only talking about now re-loaned money).
Positive factors such as aircraft leasing (it brings profit), strong positions in the market are listed below. Hence the marginal hope that nothing bad will happen. It’s interesting that finally someone tells you how much money you could get by going to the stock market. I have not seen it anywhere, but the rating agency was told – 250 million. It is not stated there how much of the company’s shares are planned to be listed on the stock exchange.
If you fail to sell on the stock exchange, you will have to stop the plans to buy new planes. It is planned to spend 130 million on this every year. At the end, it is mentioned that our airline flagship is comparable to the Hawaiian Airlines in terms of financial stability. It is warm there and bananas grow – positive.
https://fitchratings.com/research/corporate-finance/fitch-publishes-air-baltic-corporation-b-idr-outlook-stable-29-04-2024
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