LATAM ABS rated by Fitch

Dino D'Amore
By Dino D'Amore October 23, 2013 09:38

LATAM ABS rated by Fitch

Fitch Ratings has stated that it expects to assign a rating of ‘BB+(exp)’ with a Stable Outlook to Guanay Finance Limited’s proposed $450 million issuance of senior notes. Guanay Finance Limited is a special purpose vehicle incorporated in the Cayman Islands and sponsored by LATAM Airlines Group (LATAM).

The proposed issuance is backed by US and Canadian dollar-denominated receivables from ticket and cargo sales generated by credit, debit or charge cards in the United States and Canada. The majority of receivables will be for flights to and from North American gateways. The pool of receivables grew 21.45% CAGR from 2005-2012 driven by increased capacity and yield, improved load factors, the strength of the North American cargo business and growth in internet ticket sales. Many of the key North American gateways are more profitable than LATAM’s overall and long-haul businesses.

Fitch expects the average quarterly debt service coverage ratio (DSCR) to be approximately 3.78x. This is based on average quarterly receivables for the last 12 months and the average quarterly debt service for the life of the transaction.

The notes will be offered with a tenor of up to seven years with a two-year interest-only period. The amortization schedule will be sculpted to be in line with seasonality of collections. The average quarterly debt service for the issuance is approximately $26.5 million with a minimum of $25.9 million and a maximum of $27.6 million.

Citibank is turstee on the deal.

The proposed issuance represents approximately 4.4% of LATAM’s consolidated debt and 6.8% of unconsolidated debt (excluding TAM). While these percentages are low relative to the balance sheet, the transaction size is large compared to the company’s total unsecured debt, as most of company debt relates to leases and secured debt.

Dino D'Amore
By Dino D'Amore October 23, 2013 09:38
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