S&P rates JetBlue convert B

Standard & Poor's assigned a BB- corporate credit rating to JetBlue Airways Corp. and a B rating to its new $150 million of 3.5% convertible notes due 2003.

The outlook is developing.

The corporate credit rating is based on low operating costs and a record of profitability, even in the current weak airline industry environment.

However, this is offset by a short operating history, limited route structure and risks associated with an aggressive growth strategy.

The rating on the convertible notes is two notches lower than the corporate credit rating based on a substantial amount of secured debt and leases relative to total owned and leased assets.

Lease-adjusted debt to capital of around 70%, pro forma for the recent $122 million secondary equity offering and $150 million convertible, is among the lowest in the industry, S&P said.

Liquidity is strong, with over $500 million of cash, pro forma for the offerings. JetBlue primarily relies on internally generated cash and cash on hand to meet liquidity requirements, as it has no credit facilities.

S&P expects internally generated cash and equipment financings will be sufficient to meet capital spending needs over the next several years. Debt maturities average $50 million a year through 2007, well below expected funds from operations in excess of $150 million a year.

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