Continental Airlines' $400M Shelf Rated B/B- by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/24/97 -- Standard & Poor's today has assigned its preliminary single-'B' senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. and preliminary single-'B'-minus subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". ratings to Continental Airlines Inc.'s $400 million Rule 415 shelf registration filed June 16, 1997. The corporate credit rating is single-'B'-plus and the rating outlook is positive. Senior unsecured debt is rated slightly lower than Continental's corporate credit rating, because a material portion of assets are secured, placing senior unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. in a partially subordinated position. Continental's ratings reflect a relatively limited route network, focused on hubs at Houston and Newark, and rising capital expenditures to upgrade its fleet. A rapidly improving revenue and earnings trend, and ongoing rebuilding of its equity base are positives. Continental, the fifth-largest U.S. airline, serves markets mainly in the southern and eastern U.S., with small but profitable international routes in the central Pacific, to Mexico and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , and to Europe. The company has built up solid positions in each of these markets and has room for some further development of its domestic hubs and international flights, particularly from Newark to Europe and Latin America. Continental's revenues over the past year-and-a-half have benefited from discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of low-fare "Continental Lite" flying, an increasing share of higher-yielding business traffic as service and reliability improve, and an industrywide in·dus·try·wide adv. & adj. Throughout an entire industry: sales that have decreased industrywide; industrywide cooperation. upturn in traffic and yields. Costs have increased also, but to a lesser extent, reflecting investment in fleet and service initiatives and discontinuation of the low-cost, but unprofitable, Continental Lite. Debt and leases total about $5 billion and will increase going forward, despite expected healthy cash flow as Continental takes delivery of $2.75 billion of new aircraft over 1997-1999. Rising earnings and issuance of $242 million of preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. in December 1995 have begun to rebuild a thin equity base, reducing debt leverage. Cash and investments exceed $1 billion following strong cash flow in 1996 and the issuance in early December 1996 of $250 million senior unsecured notes. OUTLOOK: Positive. The outlook is based on Continental's rapid progress in earnings, cash flow, and rebuilding of its balance sheet, which could lead to an upgrade. Satisfactory resolution of pending pilot contract negotiations could be a factor in the rating review, Standard & Poor's said. -- CreditWire CONTACT: Philip Baggaley, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1309 |
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