Research Update: Airline Caterer gategroup Downgraded To 'B' And Put On CreditWatch Negative As COVID-19 Heightens Liquidity Risk

The COVID-19 pandemic has caused air traffic to plunge, with many airlines grounding all or most of their fleets due to governments' travel restrictions and quarantine orders. The sharp drop in air passenger traffic expected in the coming months will eat into airline caterer gategroup's leverage and cash flows, reduce its liquidity, and increase refinancing risk for its debt maturities due 2021-2022. We also estimate that the company would breach its financial covenant testing as early as June 2020, unless it obtains a waiver or equity cure. Based in Switzerland, gategroup is the global leading provider of airline catering, retail-on-board and hospitality products and services, with S&P Global Ratings-adjusted EBITDA of about Swiss franc (CHF) 380 million in 2019. We

...- The COVID-19 pandemic has caused air traffic to plunge, with many airlines grounding all or most of their fleets due to governments' travel restrictions and quarantine orders. - The sharp drop in air passenger traffic expected in the coming months will eat into airline caterer gategroup's leverage and cash flows, reduce its liquidity, and increase refinancing risk for its debt maturities due 2021-2022. We also estimate that the company would breach its financial covenant testing as early as June 2020, unless it obtains a waiver or equity cure. - Based in Switzerland, gategroup is the global leading provider of airline catering, retail-on-board and hospitality products and services, with S&P Global Ratings-adjusted EBITDA of about Swiss franc (CHF) 380 million in 2019. - We are lowering our issuer credit rating on gategroup Holding AG to 'B' from 'B+' and are placing the rating on CreditWatch with negative implications. - The CreditWatch placement indicates that we see at least a one-in-two...

Research Update