Shares of the New York-based company
plummeted 19%.
JetBlue intends to raise $1.5
billion through a private offering of senior secured notes and an
additional $1.25 billion via a term loan, secured by TrueBlue.
It also plans to raise $400 million
through a convertible notes offering, primarily to refinance existing
debt.
S&P downgraded JetBlue's ratings
from "B" to "B-", citing concerns about its financial health.
The agency expects JetBlue's funds
from operations to debt ratio — a leverage ratio used to assess
financial risk — to remain in the low single digits through 2025, with
negative net cash flow from business operations.
Moody's downgraded JetBlue's
corporate family rating to "B3" from "B2", stating that restoring the
company's operating profit and cash flow to levels that would lead to
materially stronger credit metrics would require several years.
It expects the airline to burn
$2.2 billion in cash in 2024 and $1.4 billion in 2025.
Leveraging loyalty programs as
collateral has become a popular strategy for airlines to boost
liquidity, a practice that gained traction during the COVID-19
pandemic.
Delta Air (DAL.N)
and
United Airlines (UAL.O)
also previously leveraged their
loyalty programs to enhance cash reserves during challenging times.
Fitch Ratings affirmed JetBlue's
rating at "B" with a stable outlook, citing "healthy" liquidity and
manageable near-term debt maturities.
It, however, warned that a
failure to improve profitability and cash flow in near term could
result in negative rating actions.
JetBlue has been trying to
control costs, including deferring deliveries of 44
new jets from Airbus (AIR.PA)
reducing its planned
capital expenditure by about $3 billion between 2025 and 2029.
Its operations have also been
impacted by a powder metal issue with Pratt & Whitney's Geared
Turbofan engines, forcing the airline to ground several aircraft.
Reporting
by Shivansh Tiwary in Bengaluru and Rajesh Kumar Singh in
Chicago; Editing by Tasim Zahid and Shilpi Majumdar
