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United Airlines, Inc. -- Moody's assigns Ba1 ratings to United Airlines' new senior secured debt offerings

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Rating Action: Moody's assigns Ba1 ratings to United Airlines' new senior secured debt offeringsGlobal Credit Research - 12 Apr 2021New York, April 12, 2021 -- Moody's Investors Service ("Moody's") assigned Ba1 ratings to United Airlines, Inc.'s ("United") new credit facility and senior secured notes that the company announced earlier today. Parent, United Airlines Holdings, Inc., will unconditionally guarantee the new debt. The obligations will be secured on a pari passu basis by all of the company's international route authorities issued by the US Department of Transportation, all of its landing and take-off slots at foreign and domestic airports, including New York's JFK and LaGuardia and Ronald Reagan Washington National Airport and rights to use or occupy the space used for flight operations at airport terminals. The credit facility will include a $1.75 billion revolving credit commitment that expires in 2025 and a term loan B due in 2028.United will use the proceeds for general corporate purposes, including the repayment in full of the $1.4 billion outstanding on the term loan it arranged in March 2017, the $1 billion outstanding on the existing revolving credit facility that will be retired in this refinancing, and the $520 million drawn on the CARES Act secured loan from the US Treasury. United will also terminate the secured loan commitment from the US Treasury. The Ba2 corporate family rating and negative outlook of United Airlines Holdings, Inc. and its subsidiaries including United Airlines, Inc. are unaffected by today's ratings assignments.RATINGS RATIONALEThe Ba2 corporate family rating reflects United's favorable business profile as the third largest US and global airline based on revenue. Moody's believes United retains the potential to restore its operating and credit profiles through 2022 and 2023 as the budding recovery of domestic travel demand expands to business and international travel through 2022. The ratings also reflect the company's good liquidity, which will strengthen following the closing of the new term loan and notes. Moody's expects cash and marketable securities of about $21 billion at March 31, 2021 pro forma for the new financing. The improvements in service, the increased variable cost structure and expectations that United will effectively deploy capacity relative to demand should promote improving financial performance through the recovery from the coronavirus. The Ba2 rating also reflects Moody's expectation that management will prioritize debt repayment to strengthen its capital structure in upcoming years.The Ba1 senior secured rating, one notch above the corporate family rating, is assigned using Moody's Loss Given Default rating methodology. The up notching results from the sufficiently large first loss position of unsecured claims.The negative outlook reflects the potential for a prolonged recovery of business and international travel demand, which would delay earnings generation and cash flow needed to retire debt and strengthen credit metrics.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be downgraded if Moody's believes that free cash flow and excess cash on hand will not be sufficient for United to reduce debt to sequentially improve credit metrics through 2023. For example, if Moody's does not expect debt-to-EBITDA and funds from operations plus interest-to-interest to approach 4.5x and exceed 4x, respectively, by the end of 2023, ratings could be downgraded. Liquidity that is sustained below $10 billion before demand substantially recovers to pre-pandemic levels could also pressure the ratings. There will be no upwards ratings pressure until after passenger demand, including for business and international long-haul travel, returns to pre-coronavirus levels. Key credit metrics will also need to strengthen, indicated by EBITDA margins above 18%, debt-to-EBITDA of about 3x and funds from operations plus interest-to-interest of about 6x.The principal methodology used in these ratings was Passenger Airline Industry published in April 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091811. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Assignments:..Issuer: United Airlines, Inc.....GTD Senior Secured Revolving Credit Facility, Assigned Ba1 (LGD3)....GTD Senior Secured Term Loan, Assigned Ba1 (LGD3)....GTD Senior Secured Regular Bond/Debenture, Assigned Ba1 (LGD3)COMPANY PROFILEUnited Airlines Holdings, Inc. (NASDAQ: UAL) is the holding company for United Airlines, Inc. United Airlines, Inc. and United Express operated an average of 5,000 flights a day to 362 airports across five continents prior to the coronavirus. Revenue was $43.2 billion in 2019 and $15.3 billion in 2020.REGULATORY DISCLOSURESFor 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_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.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. Jonathan Root, CFA Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Peter H. Abdill, CFA MD - Corporate Finance Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 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 CREDIT RATINGS AFFILIATES ARE THEIR 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. 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