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.”