Qantas bond risk flies as S&P cuts rating to junk
Shares drop to record low as default risk rises on expectation of losses
Add BT as a preferred source[SYDNEY] Qantas Airways Ltd's bond risk climbed above lower-rated British Airways Plc for the first time since 2007 as Australia's largest carrier considers asset sales to help fund new aircraft purchases.
The cost of insuring Qantas against a default rose 65 basis points to 280 basis points on Dec 6, the most in seven years, after Standard & Poor's cut its ratings to junk. A 112 basis point jump since May 9 pushed the credit-default swaps past those on British Airways, which lost its S&P investment grade in 2009.
Qantas expects to lose as much as A$300 million (S$342 million) in its first half, forcing the airline to either take on debt, issue shares or sell assets to pay for new planes. An internal review looking at divestments, and a proposed sale-and-leaseback arrangement for its fleet, have heightened the uncertainty, according to Westpac Banking Corp.
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