NEW YORK, Aug 19 (AFP) - Standard and Poor's downgraded the credit rating of US carrier Delta Air Lines, which had already been considered vulnerable to default.
The corporate credit rating was cut one notch to CCC from CCC-plus because of the rising risk of a restructuring of its debt, the agency said.
The outlook was negative.
Delta had announced it was seeking looser terms from holders of securities it had issued to finance equipment so as to gain "greater flexibility to effect a successful out-of-court restructuring."
A restructuring of bond payments or a coercive bond exchange would be considered a default.
"Delta's consent solicitation provides the clearest signal yet that the company will seek to restructure selected debt obligations outside of bankruptcy," said Standard and Poor's credit analyst Philip Baggaley.
The changes sought would make possible certain types of debt restructuring, such as a tender offer or exchange offer, if certificate-holders agreed, he said.
Delta liquidity, previously substantial, was dwindling rapidly, with 2.0 billion dollars of unrestricted cash at June 30, 2004, down from 2.7 billion dollars at December 31, 2003.
Standard and Poor's said Delta had indicated it expected its cash position to decline at a similar rate during the second half of the year, which would imply year-end cash of 1.5 billion dollars.
"Although this amount in itself would not necessarily trigger a bankruptcy filing, expectations of further cash losses during the seasonally weak first quarter might persuade Delta to file for Chapter 11 (bankruptcy filing) unless it had secured the labor concession it is seeking."
Delta reported a net loss of 1.96 billion dollars in the second quarter, mostly because of an accounting charge. Excluding the charge, losses amounted to 312 million dollars.