Qantas' Share Price Is Up For The Month, Despite Being Junked By Two Ratings Agencies

Qantas’ share price has risen almost 4.7% in the past month, despite having its credit rating downgraded to junk status twice in that time.

The airline closed today at $1.12 a share, up 1.82% after being downgraded to Ba2 by Moody’s this morning.

Standard & Poor’s downgraded Qantas to BB+/B at noon on December 6. Qantas halted trading on the ASX for two hours in anticipation of the S&P announcement, and shares fell about 3.9% to $1.03 that day.

Via investing.com, here’s what’s happened since the December 6 trading halt:

Both agencies have warned that Qantas’ credit rating could slip further on its declining profitability and increased competition in the domestic market from Virgin Australia.

But Qantas – and presumably shareholders – were unsurprised by today’s Moody’s downgrade, which came after a review that commenced on December 5.

From the airline’s statement to the ASX this morning:

“The downgrade follows Qantas’ market update on 5 December, which outlined a projected underlying loss before tax of $250 million to $300 million for the first half of FY14

As at 31 December 2013 the Qantas Group had strong liquidity, including substantial cash reserves and undrawn committed bank facilities totalling approximately $3 billion.

Over the course of FY13, gross debt was reduced by $1 billion and the Group’s debt maturity profile was extended considerably through a range of transactions, with no significant debt refinancing due until mid-2015.

Qantas is continuing to work through the accelerated, $2 billion Qantas Transformation cost reduction program and the capital expenditure and structural review announced on 5 December in response to fundamentally changed market conditions.

[…]

Qantas will provide an update on the Qantas Transformation program, as well as the capital expenditure and structural review, in February 2014.”

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