Kroll Bond Rating Agency (KBRA) assigns issuer ratings of B+ with a Negative Outlook to Hawaiian Holdings, Inc. and its direct wholly owned subsidiary, Hawaiian Airlines, Inc. (collectively "Hawaiian" or "HA"). KBRA also assigns an A rating to Hawaiian’s proposed pass-through trust series 2020-1 $217.0 million Class A certificates due September 2027 and BBB to $45.0 million Class B certificates due September 2025, with a Negative Outlook.
The credit ratings for Hawaiian reflect our expectation that the company has sufficient level of liquidity to manage through the COVID-19 crisis. HA entered the crisis from a strong liquidity position and with modest level of near-term debt maturities. The company has taken aggressive steps to preserve liquidity by suspending dividends and share repurchase programs, deferring non-aircraft capex, delaying payments to suppliers and deferring maintenance on aircraft. The ratings are further supported by the company’s strong position in the Hawaiian interisland travel market, demonstrated track record of stable operating performance and recent fleet renewal. Credit negatives include company’s geographic concentration and its reliance on demand for leisure travel to the Hawaiian Islands. The company’s small size, unionized workforce and diminishing access to external capital compared to its much larger U.S. peers are additional limiting factors. The Negative Outlook primarily reflects our expectations for slower recovery in demand such that HA’s credit metrics will be outside its historic levels for the next 18-24 months.
The preliminary A and BBB ratings for Class A and Class B Certificates, respectively, reflect KBRA’s expected loss simulation, the issuer rating of Hawaiian Airlines, Inc., the legal protection provided under Section 1110 of the U.S. Bankruptcy Code ("Section 1110") and the underlying good-quality aircraft collateral pool as well as the pool’s significant importance to HA’s operations, which support a high likelihood of affirmation in the case of bankruptcy or restructuring of HA. The ratings also take into account the priority of payments for the senior and subordinated certificates, the payment-in-kind ("PIK") feature of up to three semi-annual interest payments (which have been put in place in lieu of a liquidity facility) and the other EETC structural protections available to the certificate holders. The Negative Outlook captures the current uncertainty of aircraft values and weak secondary market demand.
- Coronavirus (COVID-19): Aircraft Values and Lease Rates
- Coronavirus (COVID-19): Air Cargo: A Bright Spot in a Dark Sky
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here and here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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