Continental Air Revolving Credit Upgraded to BB by S&P.NEW YORK--(BUSINESS WIRE)--S&P CreditWire 8/15/97--Standard & Poor's today raised its rating on Continental Airlines Inc.'s $225 million bank revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility due June 30, 2000 to double-`B' from double-`B'-minus. The facility now has the same security package as the double-`B'-rated $350 million bank term loan due through July 31, 2004. Continental Airline's corporate credit rating is double-`B'-minus and the outlook is stable. The revolving credit and bank term loan, together a $575 million facility, are rated one notch higher than Continental's corporate credit rating because they are secured by valuable international route rights and various other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. of Continental Micronesia Continental Micronesia is a wholly owned subsidiary airline of Continental Airlines. It operates daily flights to Honolulu, Hawaii, as well as international services to Asia, Micronesia and Australia from its base of operations at Antonio B. Inc. (CMI (Computer-Managed Instruction) Using computers to organize and manage an instructional program for students. It helps create test materials, tracks the results and monitors student progress. ), a profitable unit which operates in the central Pacific. The routes have a book value of over $500 million and an appraised value An appraised value (USA) or mortgage valuation (Australia) pertains to the assessed value of real property in the opinion of a qualified appraiser or valuer. It is usually used as a pre-qualification & risk-based pricing factor related to the issuance of mortgage loans by a of $750 million. The term loan, in two tranches, refinanced a previous secured bank facility to CMI and provided funds to buy out the former minority owner of that company. The buyout of the minority owner, funded today, allows the revolving credit access to the CMI collateral. In addition, the bank facility has potential additional asset protection from a springing lien on a pool of Continental international routes, and takeoff and landing slots Landing slots or Airport slots are rights allocated to an airline by an airport or government agency granting an airline the right to schedule a landing or departure at a specific time. at three busy airports. The value of this pool has been appraised at $426 million. The lien would take effect if Continental triggered any of several covenants addressing unrestricted cash levels, fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making , net worth, or other specified events. Standard & Poor's believes that these covenants, particularly the unrestricted cash minimum, should take effect well in advance of any potential bankruptcy. Borrowings under both facilities are priced based on a matrix of public senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings assigned by Standard & Poor's, Moody's, and Duff & Phelps, although the facility is secured. Continental's double-`B'-minus corporate credit rating, which was upgraded to that level yesterday (see Aug. 14, 1997 press release), is based on the company's solid earnings and cash flow, driven by much improved revenue generation, with prospects for continued good performance going forward. Rising labor costs and capital expenditures to upgrade Continental's fleet are limiting credit factors. OUTLOOK: STABLE The outlook anticipates further revenue growth, offset by higher labor and capital costs. Accordingly, earnings and cash flow measures are not expected to improve from current satisfactory levels, though gradual further improvements in leverage are likely, Standard & Poor's said. ---CreditWire CONTACT: Philip Baggaley, 212/208-1309 |
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