Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China.
Additional debt raised to bolster liquidity, higher leverage, and reduced financial flexibility were the main factors that contributed to Fitch’s downgrade, according to the rating agency’s report.
American Airlines has a consensus rating of a Moderate Sell with an average price target of $21.25 per share, reflecting an upside potential of about 100% to the current share price.
The airline has “a significant amount of liquidity and the ability to raise more in the near term if needed,” according to Fitch. The rating agency projects that the financial distress the company is facing will be manageable in the next few months, but warned that future downgrades were possible as cash burn will be significant if the drop in demand goes on longer than expected.
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