Bloomberg News

Latam Airlines Debt Rating Cut to Junk by Fitch After Merger

June 22, 2012

Latam Airlines Group SA’s credit rating was lowered to junk by Fitch Ratings after it was formed today from the takeover of Tam SA by Lan Airlines SA.

Lan changed its name to Latam today, according to a statement sent to the Santiago stock exchange. Fitch cut Latam’s rating two steps to BB+, or one level below investment grade. Tam’s credit ranking was raised two levels to BB from B+. Yields on Tam’s benchmark 8.375 percent dollar bonds due 2021 slipped two basis points today to 8.04 percent, according to data compiled by Bloomberg. Lan has no outstanding bonds.

Lan, based in Santiago, had sought to retain the highest credit rating among global air carriers after its acquisition of Tam to hold down borrowing costs amid a seven-year, $8.9 billion fleet expansion. The takeover created the world’s biggest airline by market value.

“Incorporated in the ratings is Latam’s track record of maintaining a relatively stable credit profile through the economic cycle during the last several years as well as the deterioration in its credit metrics during the 24 months period ended in March 2012,” Fitch analysts led by Jose Vertiz said in a report released today. “This has been driven primarily by the implementation of its strategic fleet plan.” Lan and Tam will continue to operate flights under their own brands.

To contact the reporters on this story: Boris Korby in New York at; Sebastian Boyd in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

Steve Ballmer, Power Forward
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