U.S. markets closed
  • S&P 500

    3,269.96
    -40.15 (-1.21%)
     
  • Dow 30

    26,501.60
    -157.51 (-0.59%)
     
  • Nasdaq

    10,911.59
    -274.00 (-2.45%)
     
  • Russell 2000

    1,538.48
    -23.10 (-1.48%)
     
  • Crude Oil

    35.72
    -0.45 (-1.24%)
     
  • Gold

    1,878.80
    +10.80 (+0.58%)
     
  • Silver

    23.72
    +0.35 (+1.52%)
     
  • EUR/USD

    1.1641
    -0.0037 (-0.31%)
     
  • 10-Yr Bond

    0.8600
    +0.0250 (+2.99%)
     
  • GBP/USD

    1.2953
    +0.0030 (+0.23%)
     
  • USD/JPY

    104.6350
    +0.0250 (+0.02%)
     
  • BTC-USD

    13,773.30
    +54.50 (+0.40%)
     
  • CMC Crypto 200

    265.42
    +1.78 (+0.68%)
     
  • FTSE 100

    5,577.27
    -4.48 (-0.08%)
     
  • Nikkei 225

    22,977.13
    -354.81 (-1.52%)
     

Swissport Financing S.a r.l. -- Moody's downgrades Swissport to C upon announced restructuring plans

·17 mins read

Rating Action: Moody's downgrades Swissport to C upon announced restructuring plans

Global Credit Research - 03 Sep 2020

London, 03 September 2020 -- Moody's Investors Service, ("Moody's") has today downgraded Swissport Group S.a r.l.'s ("the company" or "Swissport") corporate family rating (CFR) to C from Caa2 and probability of default rating to Ca-PD from Caa2-PD. Concurrently, Moody's has downgraded to C from Caa1 the instrument rating on the senior secured term loan B (TLB), senior secured notes (SSN) and senior secured delayed draw term loan facility, and downgraded to C from Caa3 the rating on the senior unsecured notes, all issued by Swissport Financing S.a r.l.. Moody's has also downgraded to C from Caa1 the rating on the senior secured revolving credit facility (RCF) at Swissport International AG level.

In addition, the agency also downgraded to C from Ca the instrument rating on the senior secured notes and on the senior unsecured notes (together "old notes") issued by Swissport Investments S.A. A full list of affected ratings and entities can be found at the end of this press release. The outlook on all ratings remains negative.

The action reflects the anticipated debt restructuring, which will result in a significant haircut to the existing debt, which the rating agency will treat as a default. On the other hand, Moody's expects that the restructuring will provide Swissport with necessary liquidity and will help to achieve a sustainable capital structure to continue the operations. The airline industry volumes will remain deeply constrained this year and next due to the pandemic.

RATINGS RATIONALE

Today's rating action follows the announcement by the company on 31 August of an agreement between its lenders representing more than 75% of the company's senior secured debt and the company's owner, HNA, on a comprehensive debt restructuring. Swissport announced that there will be E500 million new money facilities post-restructuring and that vast majority of the existing debt will be converted to equity or extinguished, which Moody's will treat as a default. The restructuring is subject to the completion of customary conditions and regulatory and other approvals. The company is targeting completion of the restructuring by the end of 2020.

The proposed restructuring follows a period of significantly depressed cash flows which resulted from the global coronavirus pandemic. Swissport was initially impacted by the coronavirus outbreak in February and early March 2020 with restrictions on flights to and from China, Asia Pacific and other regions. As the outbreak spread Swissport's revenue from ground handling operations reduced by 90% year-on-year in April and May. The volumes subsequently started to increase and reached approximately one third of pre-crisis levels in August. However, Moody's expects flight activity to remain severely depressed, with domestic flights recovering earlier and a slower return for international and long-haul flights. Swissport has a global presence and Moody's estimates its mix of domestic and international flights to largely replicate the airline industry average in the countries in which Swissport operates.

Approximately 80% of Swissport's revenue is linked to the number of flights, which although is somewhat less volatile than passenger traffic, has been also significantly affected. Around 20% of Swissport's business is cargo handling, which is less vulnerable to a complete shutdown scenario compared to passenger traffic, but in Moody's view will also be depressed due to lower economic activity and supply chain disruption.

The International Air Transport Association (IATA) currently forecasts that 2020 global passenger numbers will be 61% down year-on-year, with 2021 volumes around 35% below 2019, and only recovering to 2019 levels by 2024. Moody's base case also assumes around 20% lower cargo handling revenues in 2020 which will gradually recover to pre-crisis level by 2022. Given high levels of uncertainty of the trajectory of the pandemic there are a wide range of possible outcomes and Moody's credit assessment considers deeper downside scenarios incorporating the risks of a slower recovery. In particular Moody's considers that 2021 is likely to remain a severely depressed year for the industry, with continued travel restrictions, health screening and social distancing, consumer concerns over travel, a weak economic environment and threats of further coronavirus outbreaks. This is likely to be partially mitigated by better preparedness by governments and healthcare systems, international coordination, pent-up consumer demand and the economic importance of resuming air travel. The timing and profile of a recovery beyond 2021 also remains highly uncertain.

Moody's acknowledges that Swissport managed to significantly reduce its total operating cost and so far was able to preserve its cash liquidity. This was thanks to pro-active reduction of personnel costs with staff layoffs, unpaid leave and enrolling in government support programmes as well as tight working capital management and capital expenditure cuts.

RATIONALE FOR NEGATIVE OUTLOOK

The negative outlook reflects Moody's expectation that a financial restructuring is highly likely.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Upward pressure on the rating is unlikely in the short term but could arise if a sustainable capital structure is put in place. Downward rating pressure could arise if Moody's expectations of recovery rates deteriorate.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS

Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety.

Moody's would like to draw attention to certain governance considerations related to Swissport. The company is currently controlled by HNA, which had a track record of pursuing an aggressive financial policy. Following the proposed restructuring Swissport will be owned by its lenders - a group of UK- and US-based funds.

LIQUIDITY

Swissport's liquidity is challenged by the decline in free cash flow generation. The company had more than E200 million cash as of 18 August 2020, after drawing its revolving credit facility (RCF) and Delayed Draw Facility. More positively, Swissport obtained a E300 million super senior interim facility to cover its cash needs through the restructuring process. In addition, the company received around $170 million of payroll support in the US.

STRUCTURAL CONSIDERATIONS

The C ratings for all the rated debt instruments reflect the significant expected losses to the lenders following the proposed restructuring in which the majority of the existing debt will be converted to equity or written off.

LIST OF AFFECTED RATINGS:

..Issuer: Swissport Financing S.a r.l.

Downgrades:

....BACKED Senior Secured Bank Credit Facility, Downgraded to C from Caa1

....BACKED Senior Secured Regular Bond/Debenture, Downgraded to C from Caa1

....BACKED Senior Unsecured Regular Bond/Debenture, Downgraded to C from Caa3

Outlook Actions:

....Outlook, Remains Negative

..Issuer: Swissport Group S.a r.l.

Downgrades:

.... LT Corporate Family Rating, Downgraded to C from Caa2

.... Probability of Default Rating, Downgraded to Ca-PD from Caa2-PD

Outlook Actions:

....Outlook, Remains Negative

..Issuer: Swissport International AG

Downgrades:

....BACKED Senior Secured Bank Credit Facility, Downgraded to C from Caa1

....Senior Secured Bank Credit Facility, Downgraded to C from Caa1

Outlook Actions:

....Outlook, Remains Negative

..Issuer: Swissport Investments S.A.

Downgrades:

....BACKED Senior Secured Regular Bond/Debenture, Downgraded to C from Ca

....BACKED Senior Unsecured Regular Bond/Debenture, Downgraded to C from Ca

Outlook Actions:

....Outlook, Remains Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

Headquartered near Zurich Airport, Swissport is the world's largest independent ground handling services company, based on revenue and the number of airport locations. In 2019, Swissport serviced flights at 300 airports in 50 countries. The Ground Services segment accounts for roughly 80% of Swissport's group revenue, with cargo handling contributing the remainder. In 2019 Swissport generated revenues and management-adjusted EBITDA of E3.1 billion and E413 million, respectively. The company is owned by the Chinese investment group HNA Group Co., Ltd.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Egor Nikishin, CFA Analyst Corporate Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Richard Etheridge Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​