DBRS Morningstar Downgrades Voyager Aviation’s Issuer Rating to SD and Senior Notes Rating to 'D'

DBRS, Inc. (DBRS Morningstar) downgraded the long-Term Issuer Ratings of Voyager Aviation Holdings, LLC (Voyager or the Company) and Voyager Finance Co. to Selective Default (SD) from CCC. Concurrently, the Long-Term Senior Debt ratings of Voyager and Voyager Finance Co. have been downgraded to ‘D’ from CC. Additionally, the Company’s Intrinsic Assessment (IA) has been withdrawn. The rating actions remove the ratings from Under Review with Negative Implications where they were placed in February 22, 2021. The downgrade follows the announcement by the Company that it has completed its Exchange Offering (the Exchange) for its Senior Notes due 2021 that was previously announced on March 30, 2021.

KEY RATING CONSIDERATIONS
The downgrades reflect our view that the Exchange was considered a distressed exchange and the equivalent to a default on its Senior Notes. As such, Voyager’s Long-Term Issuer Rating of SD reflects that the Company is still performing on its secured debt obligations and operating as a going concern, while the Long-Term Senior Debt rating is ‘D’.

RATING DRIVERS
DBRS Morningstar notes that the result of the restructuring will be an improvement in the Company’s credit profile with strengthened liquidity and enhanced financial flexibility. We will reinstate Voyager’s Intrinsic Assessment and reassess the Long-Term Issuer Rating in the coming weeks based on the Company’s revised capital structure and business plan.

RATING RATIONALE
Per the Exchange offer, the existing shareholders of Voyager have relinquished their equity stake in Voyager for a pro-rata share of $15.0 million of 8.50% Senior Notes due 2026 (the New Notes). Meanwhile, the holders of Voyager’s $415.3 million of outstanding 8.50% Senior Notes due 2021 received 100% of the pro-forma equity of Voyager, up to $150.0 million of the New Notes, and up to $200 million liquidation preference of preferred equity of an intermediate wholly owned holding company subsidiary of Voyager. The Company will maintain its existing management agreement with Amedeo, but as part of the restructuring and recapitalization, Amedeo has relinquished its 2.5% ownership in the Company for a pro-rata share of $15 million in new Notes.

DBRS Morningstar views favorably the strong participation in the Exchange and Restructuring of the holders of the Company’s existing senior notes with 98.49% participating in the Offer. As a result of the strong uptake by bondholders, Voyager surpassed the necessary threshold to pursue an out-of-court transaction. We see the ability to execute the restructuring and recapitalization outside of a court process as likely to make for a more efficient restructuring which should allow for management to focus on navigating the still challenging global aviation market and execute on potential growth opportunities.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September 29, 2020): https://www.dbrsmorningstar.com/research/367510/global-methodology-for-rating-non-bank-financial-institutions. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021): https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The primary sources of information used for this rating include Company Documents and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:
Each of the principal methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. Specifically, the “Global Methodology for Rating Non-Bank Financial Institutions” (September 29, 2020) was utilized to evaluate the Issuer and “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” (February 3, 2021) was used to assess ESG factors.

The last rating action on this issuer took place on February 22, 2021, when the ratings were downgraded.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: David Laterza, Senior Vice President, Head of Non-Bank FIG, Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of North American FIG, Global FIG
Initial Rating Date: April 9, 2018

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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