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Moody’s Upgrade easyJet to Baa2[S] From Baa3[P]

TRANSPORTATION

New Profile: Baa2[S]/BBB[P]


  • FY23 profitability, leverage, and cash generation exceeded Moody's forecasts while Q1 results in end-Dec saw a Moody’s-adj Gross EBITDA leverage of ~1.9x from 2.3x in Sept.
  • Further Moody’s-adj leverage improvements are unlikely in coming years though they now see headroom to withstand profit/cashflow reductions without a downgrade.
  • They see continued strong liquidity of GBP ~4.5bn and, despite reinstated dividends, see commitment to conservative policy with pay-outs to remain well below pre-Covid levels.
  • Upgrades possible on sustained lower debt/EBITDA below 2x, cash flow/debt above 40%, EBITDA margins in the high-teens.
  • Downgrades risked by significant drops in passenger volumes/yields, debt/EBITDA exceeding 2.5x, cash flow/debt below 30%, and failing to maintain adequate liquidity buffer.
  • Their shortest EUR 2025s are streaming with spreads 3bps tighter DoD and 35bps tighter MoM.
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