Fitch clears way for €500m Ryanair bond

Credit ratings agency Fitch has cleared the way for Ryanair to borrow €500 million through a bond issue to help foot the bill for new aircraft that it is buying from US manufacturer Boeing.

Fitch, which measures companies’ ability to pay their debts, yesterday gave the airline an investment grade BBB+ rating, and described its capacity to meet its financial commitments as “solid”.

The move opens the door for Ryanair to go ahead with a planned bond issue, likely to be €500 million, as Standard & Poor gave it a similar endorsement in March and companies need two ratings to access capital in this way.

The exact timing of the bond issue was not clear yesterday, but it is thought that the company is unlikely to go ahead with it on Monday when it is scheduled to publish its full-year financial results. However, it could be shortly afterwards.

Both the Fitch and Standard & Poor ratings class Ryanair as a lower risk for lenders than rivals such as Lufthansa.

The two agencies cited its ability to generate significant amounts of cash and its financial flexibility as factors that differentiate it from its peers.

The company will begin taking delivery of the first of 180 Boeing 737-800s that it has ordered from the US aerospace giant in September. It plans to fund the purchase of the aircraft, valued at $12 billion (€8.7 billion), from its own resources and through raising €4 billion from capital markets.

As part of this it decided this year to tap bond markets for the first time, and set out to get a rating to allow it to do this, hiring Citibank as an adviser.

Welcoming the Fitch announcement yesterday, Ryanair said it reflected the strength of its business model.

Chief financial officer Howard Millar confirmed that achieving the rating would allow the company to raise cash from the capital markets.

“We are pleased with the Fitch rating of BBB+, our second in as many months following Standard & Poor’s BBB+ rating, which makes Ryanair the highest-rated airline in the world and reflects the financial strength of Ryanair’s business model,” said Mr Millar.