JetBlue Hit With Credit Downgrades Amid $3 Billion Debt Financing

JetBlue (JBLU) shares tumbled more than 21% in intraday trading Monday after the company announced plans to raise over $3 billion in debt and received credit downgrades from major credit rating agencies.

The company announced a private offering of $1.5 billion in senior secured notes, along with a $1.25 billion term loan secured by its loyalty program TrueBlue, and another $400 million through a convertible notes offering.

Credit Rating Agencies Issue Downgrades, Anticipating Continued Weakness

Moody’s Investors Service dropped the airline’s rating to B3 from B2, saying that improving its operating profit and cash flow enough to merit an upgrade would likely take “a number of years.” The agency pointed to rising competition on the East Coast and an increased consumer appetite for premium offering as hurdles for JetBlue. 

Meanwhile, S&P Global Ratings cut JetBlue’s issuer credit rating to B- from B, anticipating continued weakness.

“We expect the operating environment to remain weak over the next 12-24 months due to excess industry capacity on many of JetBlue’s key domestic routes, higher labor costs and infrastructure-related constraints, and capacity growth limited by aircrafts on the ground due to engine issues,” S&P Global said.

Fitch Ratings maintained its B rating for JetBlue, citing a “healthy liquidity balance pro-forma for the transaction and manageable near-term maturities.” However, the agency dropped its existing senior secured debt ratings to BB-/RR2 from BB/RR1 following the financing news.

Shares of JetBlue fell more than 21% in afternoon trading Monday to $4.75 as of 3:15 p.m. ET. They’ve lost over 14% of their value since the start of the year.