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Bond Market News
LATAM Airlines Upgraded to BB by S&P
March 3, 2025
LATAM Airlines has been upgraded by a notch to BB from BB- by S&P. The upgrade follows the record results posted by the company for FY2024 despite challenges like flooding in Rio Grande do Sul, a competitive environment in Colombia, currency depreciation (particularly in Chile and Brazil), and softer yields. LATAM’s streamlined cost structure gives it a competitive advantage, maintaining stable operating costs and positioning it for resilient performance even if yields decline. According to S&P, the company is expected to maintain strong results and credit metrics over the next two years, with a forecasted net FFO-to-debt ratio of 42%-45% and debt-to-EBITDA of 1.7x. The company is also set to generate free operating cash flow (FOCF) of $500-800mn over the next two years, despite higher lease expenses and capex. LATAM’s financial policy is considered prudent, aiming to keep net debt-to-EBITDA below 2x, maintain liquidity at 21-25% of revenue, and avoid significant amortizations until 2028.
Its bonds traded stable with its 7% 2026s at 98.67, yielding 6.81%.
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