S&P Lowers Rating on Some Continental Debt

Standard & Poor's on Wednesday lowered the rating on some of Continental Airlines Inc.'s debt to a lower degree of junk status, citing declining aircraft values.

Debt ratings can affect companies' borrowing costs.

S&P said it was lowering all of its senior unsecured debt ratings to CCC+ from B-. It said it was affirming its 'B' corporate credit rating and its secured debt ratings on Houston-based Continental. B also is junk status.

The outlook is negative, S&P said.

The ratings agency said the revised ratings on Continental's unsecured debt are based principally on declining aircraft values caused by the global aviation downturn.

"This could result in reduced asset protection for unsecured creditors if Continental were to file for bankruptcy," S&P said. "With values of the company's principal asset, its fleet, under some pressure (which would intensify in a default scenario), we judged that the value remaining for unsecured creditors after satisfying the claims of secured creditors could be less than we previously estimated."

S&P said its corporate credit rating on Continental reflects its participation in the high-risk airline industry and a heavy debt and lease burden, but also better-than-average operating performance among its peers, large U.S. hub-and-spoke airlines.

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