Moody's downgrades FLYi debt

Old Oct 14, 05, 3:58 pm
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Moody's downgrades FLYi debt

Jeff Clabaugh
Washington Business Journal
October 14, 2005

In another blow for financially struggling Independence Air, Moody's Investors Service has downgraded its rating on some of parent company FLYi's debt.

The ratings service cut to "negative" its outlook on about $58 million in FLYi debt because of concerns about the collateral the company has pledged to back it up. Moody's says the regional jets used as collateral, specifically CRJ-200-ER and BAE Systems J-41 turboprops, are losing their value and weakening recovery prospects for the debt holders.

"Additionally, should the regional subsidiaries of Delta and Northwest dispose of significant numbers of their CRJ-200 -ER fleet, a relatively large percent of the total fleet of this aircraft type would enter the market simultaneously putting further pressure on aircraft values," Moody's says in its downgrade.

Independence Air (NASDAQ: FLYI) negotiated early lease terminations for a number of its turboprop jets earlier this year, but the ones pledged as collateral for the debt downgraded by Moody's were not among them.

Independence Air has significantly reduced its flight schedule and is cutting hundreds of jobs, mostly at its Dulles hub, as it tries to fend off a bankruptcy filing. The company lost $98.5 million in the second quarter. It will report third-quarter results Oct. 27.
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