United Continental EETCs unaffected by 787 grounding: Moody’s

Washington DC
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United Continental-subsidiary Continental Airlines' enhanced equipment trust certificate (EETC) issues in 2012 are unaffected by the grounding of the Boeing 787, says Moody's.

"While a protracted grounding or other event that has a permanent adverse affect on the value of the aircraft could have rating implications, we do not expect such an outcome at this time," says the ratings agency in a research note on 8 February.

United financed the six 787s in its fleet through EETC transactions last year. These include the $892.1 million 2012-1 issue in March, the $843.9 million 2012-2 issue in September and the $425 million 2012-3 subordinated issue in December.

Moody's rates the 2012-1 and 2012-2 A tranches Baa2, the 2012-1 and 2012-2 B tranches Ba2, and the 2012-3 C issue B1.

The agency notes that the Federal Aviation Administration (FAA) or a national government must ground the entire fleet of 787s for two years before it would be deemed an event of loss under the terms of the bonds. That period increases to three years if United is actively trying to return the aircraft to service, adds Moody's.

United would have 45 days to either pay off the notes or replace the 787s with a comparable aircraft or type of collateral in the event of a loss, says Moody's.

The FAA and other aviation regulators around the world grounded the 787 in January following two battery-related incidents on separate aircraft within a week of each other.