Moody’s downgrades SAS

Moody’s Investors Service said it downgraded the corporate family rating of SAS AB to Caa2 from Caa1 and the probability of default rating to Ca-PD from Caa2-PD.

Concurrently the agency confirmed the backed subordinate rating at Caa3 issued by SAS Denmark-Norway-Sweden. The outlook changed to negative from ratings under review, Moody’s said.

The downgrade of the probability of default rating by two notches to Ca-PD was prompted by SAS’ announcement of a recapitalization plan that includes the conversion of SEK 2.25 billion of senior unsecured fixed-rate bonds due November 2022 (unrated) into common shares as well as the conversion of SEK 1.5 billion of subordinated perpetual floating-rate capital securities (unrated) into common shares, Moody’s said.

“The downgrade of the corporate family rating to Caa2 from Caa1, a one-notch downgrade in comparison to the two-notch downgrade of the probability of default rating, reflects a relatively high recovery expectation at the corporate family level as evidenced by the relatively low amount of debt being part of the distressed exchange and the recovery expectation on the specific instruments that are part of the recapitalization plan,” the agency said in a press release.

The change in outlook reflects the execution risk, and that recovery expectations could be lowered, Moody’s said.

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