Qantas may soon need to pursue a capital raising. Photo: Jim Rice
THE prospect of Qantas needing to pursue a capital raising in the next two years has increased, following the latest downgrade of its investment-grade credit rating to just one notch above junk status, analysts say.
Qantas has jealously guarded its investment-grade rating over the years, and it was a reason for its decision three years ago just after the global financial crisis to raise more than $500 million in new equity.
Moody's cited high fuel prices and strong competition as the key reasons for its latest decision to lower Qantas' credit rating from BAA2 to BAA3.
CBA Equities' transport analyst, Matt Crowe, said the likelihood of Qantas having to tap investors for new equity in the medium term had increased after the downgrade because the airline was left with ''little wriggle room'' to retain an investment-grade rating.
''They have got a lot of capex in the coming years to upgrade their fleet,'' he said. ''That is a lot of debt that they will have to fund. It is possible some of that will have to be funded through equity. They have said in the past that their investment-grade credit rating is very important and they have shown that when it is under threat they will raise equity.''
Qantas plans more than $5 billion in capital expenditure over the next two years. Macquarie Equities' aviation analyst, Russell Shaw, said the chances of Qantas needing to raise capital over the next two years had increased but in the short term it had levers to pull to avoid having to do so.
After the downgrade, Qantas was quick to reassure investors that it ''remains in a strong financial position''. Qantas closed down 1.5¢ at $1.56 yesterday.
