Standard & Poor’s (S&P’s) has affirmed its B- long-term corporate credit rating on Turkey-based MNG Airlines and removed the rating from CreditWatch, where it was placed on March 18, 2003. The outlook on the airline is stable, stated press release.
"The rating actions follow a review of the effect on MNG of the hostilities in Iraq and of subsequent business developments in the company," said S&P's credit analyst Leigh Bailey.
The rating on MNG reflects the company's high financial leverage, the specific risk characteristics of the airline industry, and the operating challenges associated with a strategy of rapid growth and diversification.
MNG's credit quality benefits from the company's strategic preference for contracts that guarantee a predetermined rate per hour, diversified customer base, and competitive cost position. As of September 30, 2003, MNG had total debt and finance leases of $112 million.
MNG's financial metrics are expected to remain broadly unchanged in the medium term. Cost reductions through the internalization of external functions--such as maintenance and ground handling--are likely to be offset by incremental expenses related to the company's corporate jet business and a possible dilution of the company's business mix through expansion in activities such as domestic scheduled passenger services, which are unlikely to be as lucrative as existing businesses.
"Due to a highly leveraged balance sheet structure, MNG will remain vulnerable to the availability of refinancing when repayments are due under its debt and lease contracts, added Bailey. "The rating assumes that such funding will be readily available for MNG's aircraft types in the foreseeable future." — (menareport.com)
© 2003 Mena Report (www.menareport.com)
