REFILE-European shares tumble as Deutsche Bank worries weigh
LONDON, Sept 30 European shares fell sharply to eight-week lows on Friday as fresh concerns over the stability of Deutsche Bank spooked investors, weighing particularly on banking stocks.
Overview -- JetBlue Airways Corp.'s financial profile has improved over the past year because of stable operating performance and debt reduction. -- We are affirming our ratings, including the 'B-' corporate credit rating, and revising the outlook to positive from stable. -- We are also raising our issue and recovery ratings on its senior convertible subordinated debt. -- The positive outlook reflects our belief that the company's financial profile will continue to improve as a result of increased levels of cash flow generation and continued debt reduction. Rating Action On Dec. 14, 2012, Standard & Poor's Ratings Services affirmed its ratings, including its 'B-' corporate credit rating, on New York City-based airline JetBlue Airways Corp. (JetBlue). At the same time, we revised our outlook on the rating to positive from stable. We also raised our issue rating on the company's senior convertible debt to 'CCC+' from 'CCC' and revised our recovery rating on that debt to '5' from '6', indicating our expectation of modest (10%-30%) recovery in a default scenario. Rationale The outlook revision on JetBlue is based on the company's improved financial profile over the past year because of stable operating performance and debt reduction. For the 12 months ended Sept. 30, 2012, EBITDA interest coverage rose to 3x from 2.4x a year earlier, funds from operations (FFO) to debt rose to 15% from 11%, and debt to capital declined to 71% from 74%. We anticipate further improvement in these credit metrics, assuming fuel prices remain relatively stable, the economy grows modestly, and the company continues to reduce debt. The corporate credit rating on JetBlue reflects its participation in the high-risk U.S. airline industry and a substantial debt burden. Competitive operating costs are a positive credit factor, in Standard & Poor's assessment. Under our criteria, we characterize JetBlue's business profile as "weak," its financial profile as "highly leveraged," and its liquidity as "adequate." JetBlue is a midsize U.S. low-cost, low-fare airline that started operating in 2000 from New York's JFK International Airport, which remains its principal hub. JetBlue's profitability has been more consistent than most other airlines since 2010. Still, the airline's financial profile remains highly leveraged. Assuming fuel prices remain relatively consistent, the economy grows modestly, and the company continues to reduce debt, we expect JetBlue's credit metrics to improve somewhat in 2013. We expect the company to finance its capital spending for new aircraft primarily through cash and cash generated from operations. Potential threats to this scenario include materially higher fuel prices and a significant slowdown in the already sluggish U.S. economic recovery. The company has substantial debt maturities and capital spending for new aircraft in 2013 and 2014. In 2013, debt maturities are $397 million and committed capital spending for new aircraft is $450 million; in 2014, debt maturities are $576 million and committed capital spending for new aircraft is $520 million. We anticipate the company will be able to refinance a significant portion of upcoming debt maturities and finance new aircraft deliveries from cash, cash generated from operations, and from various lenders. JetBlue serves destinations in the U.S., Puerto Rico, the Caribbean, and Latin America. Its primary hub is at JFK, with smaller focus cities of Boston; Fort Lauderdale, Fla.; Long Beach, Calif.; Orlando, Fla.; and San Juan, Puerto Rico. Although it is less diversified than larger airlines because of the substantial percentage of its operations at JFK, it does benefit from its operations at Boston, where it is the largest airline, as well as its many interline relationships with other airlines, including Hawaiian Airlines, Air Lingus, Lufthansa, and American Airlines. JetBlue operates a relatively young, fuel-efficient fleet consisting of 123 Airbus 320s (a midsize narrowbody plane) and 52 Embraer 190s (a large regional jet) as of Sept. 30, 2012. JetBlue's operating costs remain among the lowest in the U.S. airline industry, mostly because of the high productivity of its assets and labor. The airline's employees are not unionized (in contrast with those at Southwest Airlines Co., the largest low cost airline) but are well paid by industry standards, particularly following wage cuts at the legacy carriers. JetBlue has taken on substantial debt and leases to finance its fleet growth. The company began its operations relatively well-capitalized (for a start-up), added to retained earnings in its first several years of operations, and undertook several offerings of common shares. Debt to capital was 71% as of Sept. 30, 2012--high but less than those of most U.S. airlines. JetBlue opened a new terminal at JFK Airport in October 2008, which it leases from the Port Authority of New York and New Jersey, but it is carried on JetBlue's balance sheet as "assets constructed for others," totaling $561 million as of Sept. 30, 2012. The related liability is shown as "construction obligation" ($517 million), which we include as debt. JetBlue has no defined-benefit pension plans or retiree medical liabilities. Liquidity We believe JetBlue's liquidity is adequate. Major sources of liquidity include internal cash flow and $1.1 billion of unrestricted cash and short-term investments as of Sept. 30, 2012 (equal to 22% of JetBlue's annualized revenues--in line with U.S. airlines, which typically average 20%-25%). In July 2012, JetBlue entered into a $100 million revolving credit facility secured by a portion of its investment securities. It also has a $125 million unsecured revolving credit facility with American Express, solely for the purchase of jet fuel, which matures in January 2015. Major uses of cash include maturities of debt and capital leases, and committed capital spending. We expect the company will be able to refinance a significant portion of upcoming debt maturities and finance new aircraft. Still, success in raising new financing will be important in maintaining or improving the company's liquidity. In accordance with our criteria, relevant aspects of JetBlue's liquidity, in our view, are as follows: -- Sources should cover uses in excess of 1.2x (the minimum for an adequate designation) through 2013. -- We expect that net sources would be positive even with a 15% decline in EBITDA, consistent with our criteria standard of 15%. -- We believe JetBlue likely will be able to absorb high-impact, low-probability events with limited refinancing. -- We see risk management practices as generally prudent, with a focus on cash liquidity and use of hedging to somewhat mitigate the risk of fuel price fluctuations. In addition, JetBlue's credit card processing agreements contain no fixed financial covenants, although the processors may withhold cash in certain circumstances. The American Express facility has financial covenants, which include minimum cash and short-term investment levels and a minimum EBITDA margin. We believe that JetBlue would not be subject to withholding, if any, sufficient to cause pressure on liquidity or for the company to breach the American Express facility covenants, even with a 15% decline in EBITDA. Recovery analysis We raised our issue rating on JetBlue's convertible senior subordinated debt to 'CCC+' from 'CCC' (one notch above the corporate credit rating), and revised the recovery rating to '5', indicating our expectation of modest (10%-30%) recovery in a default scenario, from '6'. The company has paid down some debt over the past year, improving asset coverage. For the complete recovery analysis, see our recovery report on JetBlue to be published later on RatingsDirect. Outlook The outlook is positive. We expect JetBlue's credit metrics to improve somewhat as a result of increased cash flow generation and debt reduction, with EBITDA interest coverage increasing to the low-3x area from 3x for the 12 months ended Sept. 30, 2012; FFO to debt increasing to the high-teens percent area from 15%; and debt to capital declining to below 70% from 71%. We could raise ratings if the company's credit metrics continue to improve as we expect and it is successful in refinancing substantial upcoming debt maturities in 2013 and 2014. We could revise the outlook to stable if reduced earnings and cash flow cause FFO to debt to remain in the low-teens percent area or if liquidity falls to less than 15% of annual revenues on a sustained basis. Related Criteria And Research -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Methodology and Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- Key Credit Factors: Criteria For Rating The Airline Industry, Oct. 22, 2010 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Ratings Affirmed; Outlook to Positive To From JetBlue Airways Corp. Corporate Credit Rating B-/Positive/-- B-/Stable/-- Upgraded To From JetBlue Airways Corp. Senior Unsecured CCC+ CCC Recovery Rating 5 6 Ratings Affirmed JetBlue Airways Corp. Equipment Trust Certificates BBB- Equipment Trust Certificates B Equipment Trust Certificates BB+
SEOUL, Sept 30 German automotive parts supplier Robert Bosch GmbH has lodged a lawsuit in the United States against South Korean peer Mando Corp alleging infringement of four of its patents, according to a U.S. court filing.