CHICAGO, May 24 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
upgraded Atlas Air's senior unsecured debt rating from 'B' (Single-B) to 'B+'
(Single-B-Plus). The rating action affects roughly $475 million of senior
unsecured notes. The company's Rating Outlook is Stable.
The upgrade recognizes the company's leading market position as a low-cost
provider of cargo capacity, the continued strong growth projected for the
global cargo market and the expectation that management will continue to focus
on strengthening its balance sheet. In recent years, Atlas has successfully
grown its operations, demonstrated the viability of its business model with a
consistent track record, expanded its customer and geographic diversification
and improved profitability.
Atlas' strengths are tempered by a high degree of financial leverage
resulting from new aircraft acquisitions, aggressive growth and a high
customer concentration with China Airlines, which was roughly 26 percent of
1999 revenues and is expected to decline to 20 percent of 2000 revenues. As
the lessor and aircraft operator, Atlas also assumes the risk of ownership
and, therefore, is exposed to volatile lease rates, contract renewal risk and
the risk related to securing contracts on new deliveries. Furthermore,
although the scale and scope of the company's operations and the necessary
capital requirements serve as barriers to entry, the prospect of increased
competition from mimic operators does exist.
From 1996 through 1999, revenues more than doubled and EBITDAR margin
increased from 45 to 50 percent. EBITDAR coverage and lease-adjusted
debt-to-capital is currently 1.9 times and 84 percent, respectively. Revenue
growth in 2000 is imminent as the company's contracted block hours of
approximately 134,000 already exceed 1999 block hours of 110,000. DCR
anticipates that the company will complete an equity issuance in the near term
and use the proceeds to reduce debt, which should result in slightly improved
credit protection measures.
All of the company's scheduled 1998, 1999 and 2000 747-400 freighter
(400F) deliveries have been committed to long-term leases under ACMI
contracts. Atlas will need to place three recently acquired 747-300 combi's
to be converted to freighters and delivered to Atlas during the fourth
quarter. The company had no contract expirations scheduled during 2000.
While Atlas currently does not have any aircraft commitments, the company is
expected to acquire 4-5 aircraft per year (used 200/300Fs and/or new 400Fs) as
long as global demand for cargo transport remains strong. New aircraft
acquisitions will be financed with a combination of cash from operations and
debt.
Atlas Air provides low-cost, airport-to-airport air cargo transport to
major international carriers with a fleet of 22 high gross weight
Boeing 747-200 and 12 747-400 freighters. Atlas provides only aircraft, crew,
maintenance, and hull and liability insurance (ACMI), while customers pay for
all other operating costs. The company provides service to 101 cities in 46
countries, which are positioned in high-growth cargo regions.
For additional research on Atlas Air, visit DCR's Web site at
http://www.dcrco.com (Quick Search: Atlas). DCR's research is also available
on Bloomberg at DCR and First Call's BondCall Direct/Research Direct at
http://www.firstcall.com, as well as through other third-party providers.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Valerie Goetsch, 312-368-2082,
goetsch@dcrco.com, or Mark Oline, 312-368-2073, oline@dcrco.com,
both of Duff & Phelps Credit Rating Co.
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