LATAM Airlines Group (LATAM) is in the market with a proposed $450 million issuance of senior notes to be rated 'BB+(exp)' by Fitch Ratings.
The proposed issuance is backed by US and Canadian dollar-denominated receivables from ticket and cargo sales generated by credit, debit or charge cards in the United States and Canada.
Fitch expects to assign a rating of 'BB+(exp)' with a stable outlook on the senior notes issued by Guanay Finance Limited, a special purpose vehicle incorporated in the Cayman Islands and sponsored by LATAM.
Fitch says its rating on the 2013-1 notes addresses the timely payment of interest and principal on a quarterly basis.
The rating agency says the expected rating reflects the credit quality of LATAM; the strategic and growing business that backs the pool of receivables; the expected quarterly debt service coverage ratio commensurate with the expected rating category; the level of future flow debt relative to LATAM's overall funding; and moderate diversion risk.
The majority of receivables will be for flights to and from North American gateways. Many of the key North American gateways are more profitable than LATAM's overall and long-haul businesses, says Fitch.
Fitch’s says the proposed issuance represents approximately 4.4% of LATAM's consolidated debt and 6.8% of unconsolidated debt (excluding TAM Linhas Aereas).