Moody's cuts ATA Airlines EETCs, on watch

Moody's Investors Service downgraded the ratings of selected ATA Airlines Inc. (senior implied rating Caa2) Enhanced Equipment Trust Certificates and kept the ratings on review for possible downgrade.

The downgrade affects ATA Airlines' Enhanced Equipment Trust Certificates, Series 1996-1 Class A, which was cut to Ba2 from Baa3; the Series 1997-1 Class A, which was cut to Ba2 from Baa3; and the Series 2000-1 Class C, cut to Caa1 from B3.

The rating action reflects the continued decline in value of the collateral supporting these transactions - B757 aircraft. Of the four Enhanced Equipment Trust Certificate transactions that have been issued to fund aircraft used by ATA, all but the most recent (Series 2002-1) are collateralized exclusively by B757 aircraft.

In Moody's opinion, the decline in the value of the aircraft collateral in the three transactions has been substantially greater than the amortization of the debt. This has led to a meaningful deterioration in the loan-to-value ratios of these transactions.

Earlier declines in collateral value have been reflected in ratings actions downgrading the junior certificate classes to levels reflective of possible principal loss. The continued decline in collateral value has resulted in an increased risk (higher loan to value) to holders of senior classes that is no longer consistent with an investment-grade rating.

All ratings of ATA, including its Caa2 senior implied rating, remain under review for possible downgrade pending the outcome of ATA's attempt to negotiate an exchange offer with its unsecured bond holders.

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