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Bond Market News
Delta Airlines Upgraded to IG Status of BBB- by S&P
December 4, 2024
Delta Airlines was upgraded by a notch to IG status of BBB- from HY status of BB+ by S&P, making it a rising star. The upgrade comes after the company reduced its gross debt by $2bn through September 2024 and announced a conservative leverage target of 1x gross leverage, indicating its intent to strengthen its balance sheet further. According to S&P, Delta Airlines is well-positioned to improve its credit measures, with its FFO-to-debt ratio projected to exceed 30% this year and reach about 40% in 2025. The company is benefiting from structural shifts in passenger travel demand, with growth in premium, loyalty, and international revenue. Delta is set to outperform its North American peers in profitability, with expected operating margins of 10-12% over the next two years. The company does not face major increases in aircraft-related capex, and excess FOCF will likely be used for debt reduction due to large debt maturities and a conservative leverage target.
Its dollar bonds traded positive with the 7% 2025s up at 100.67 cents on the dollar, yielding 5.29%.
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