Fitch Ratings Agency downgraded LATAM Airlines Group S.A.’s (LATAM) foreign currency Issuer Default Rating (IDR) to ‘BB’ from ‘BB+’.
In addition, Fitch confirmed TAM S.A.’s foreign and local IDRs as ‘BB’ and its national long-term rating at A+
The Rating Outlook is Stable.
The downgrade reflects LATAM’s weak operational performance, impacted by the Brazilian operations, and the deterioration in its capital structure resulting in high adjusted gross leverage, lease-adjusted debt/EBITDAR basis, by the end of December 2012.
It also incorporates Fitch’s revised expectations for the company’s financial profile during the next 24 months ended in December 2014.
LATAM’s ratings incorporate its diversified business model, strong regional market position, high gross adjusted leverage, and low liquidity. The ratings also incorporate the company’s strong market position in the domestic and international Brazilian market as well as the volatility in the operational results – associated within these markets – through the economic cycle.