Moody's Investors Service said Tuesday it may cut the "A-2" senior unsecured bonds of British Airways PLC, based on the airline's announcement that it has submitted a bid to buy up to 25 percent of Qantas Airways.
Moody's said the Commonwealth of Australia is expected to make a decision about the bid in January. Australia owns 100 percent of Qantas and is in the process of fully privatizing the airline.Moody's said the potential acquisition would occur about the time the U.S. Department of Transportation is due to decide on British Airways' planned investment of $750 million in USAir Group Inc. A decision is expected before Dec 24.
Moody's said it will focus "on the impact of these investments - assuming British Airways is successful in both instances - on British Airways' financial position, including size of investment, source of financing and expected return on investment." Moody's also said it will "examine the operating benefits and synergies to be realized from a global alliance with both carriers."
British Airways responded that the announcement of a possible credit rating review is standard practice when any rated company is considering any major acquisition.
The carrier also said Standard & Poor's has informed it that the airline's current rating remains unchanged.
"We can provide for any projected investment, including USAir, from existing resources," a spokeswoman said. Thus, it will not need to raise
funds for the investment through the capital markets, she said.