Air New Zealand has achieved early one of the key aims of its $2.2 billion capital boost - maintaining its investment grade credit rating.
Photo: RNZ / Nate McKinnon
Rating agency Moody's has reaffirmed the airline's Baa2 rating with a stable outlook.
"Post the equity raising, the reset balance sheet and improved liquidity position will provide adequate cushion for the business until earnings-based credit metrics are restored to pre-pandemic levels," Moody's said in a statement.
It said it expected Air NZ would be in that position by mid-2024.
The government's continued commitment to the airline, its capital raising, and back up finance were cited as the steady credit rating.
"Moody's could downgrade ... if the government is unwilling to support Air NZ. This would likely result in multiple notch downgrades to the issuer rating.
"Moody's could downgrade the issuer rating if the implied level of government support appears to have declined, although this is not the rating agency's expectation."
The agency said it would not consider an upgrade until the ratio of debt to earnings improved on the back of growth in the airline's cash flow.
Turbulent trading
Meanwhile, Air New Zealand's share price was bumped about when it resumed trading today.
At one stage it was down more than 13 percent hitting a near two year-low of $1.17 before trimming its losses and ending the session 8 percent or 11 cents lower at $1.29.
A broker said the diluting effect of the new share issue contributed to the price fall, but the fact the shareprice was holding up also showed some investor appetite for the stock.
"It also reflects some positive support for the stock and some people buying into it to take advantage and get access to this cheap equity raise," Hobson Wealth advisor Morgan Borrett said.
Hobson Wealth director Brad Gordon said the offer price for the new shares had obviously been set low to ensure investment managers, such as his firm, would be interested in taking part.
"I think there's going to be a potential overhang for some time, so I don't think we have to rush in to this and at 53 cents {a new share} it probably does reflect value."
But at least one analyst remained unconvinced.
Jarden Securities analyst Andrew Steele renewed his "sell" recommendation and lowered his target price for Air New Zealand to 65 cents a share from 80 cents, because more shares were being issued than expected.
"While this recapitalisation is an important step in improving the investment appeal of Air New Zealand, we retain our sell rating," he said in a market note.
Investors on the Air New Zealand share register by Tuesday 5 April will be given rights to buy two new shares for every one currently held. They are not obliged to buy the new shares and will be free to buy more or sell the rights on the NZX.