Jazz Acquisition Inc. Outlook Revised To Negative On Weaker Credit Metrics Due To Coronavirus; Ratings Affirmed

  • As a result of lower aerospace aftermarket demand due to the coronavirus weakening commercial air traffic, the earnings and cash flow of Jazz Acquisition Inc. (which operates as Wencor Group) will likely be lower in 2020, resulting in weaker credit metrics than we had expected.
  • Therefore, we have revised our outlook on the company to negative from positive.
  • We have also affirmed all of the ratings, including the 'B-' issuer credit rating.
NEW YORK (S&P Global Ratings) March 26, 2020--S&P Global Ratings today took the rating actions listed above.
We expect Jazz's credit metrics to be weaker in 2020 than we'd previously expected as a result of the coronavirus. The company operates mainly as a maintenance, repair, and overhaul provider; aftermarket parts manufacturer; and distributor. Jazz will likely face much lower demand as the coronavirus pandemic leads many airlines to ground planes. The company has started taking actions to reduce costs and preserve liquidity. While we are unsure of the overall impact the coronavirus will have on Jazz, we now expect debt to EBITDA to be above 7.5x in 2020 compared to our previous forecast of about 6x.
The negative outlook reflects our expectation that Jazz's credit metrics will weaken as a result of lower air traffic because of the coronavirus. We now expect debt to EBITDA to be above 7.5x in 2020.
We could lower the ratings if the impact on Jazz's earnings and free cash flow from the coronavirus is greater than we expect, resulting in weaker liquidity. We could also consider a downgrade if sustained high leverage led us to believe that the company's capital structure is no longer sustainable over the long term.
We could revise the outlook to stable over the next 12 months if we expect debt to EBITDA to remain below 7.5x and free operating cash flow to debt to remain positive. This would likely be the result of a quicker-than-expected recovery in air traffic driving higher aftermarket demand.
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