The agency gave the Portuguese airline a rating "B", i.e. "garbage", because of the coronavirus.
Standard & Poor’s cut TAP’s rating to three levels due to the impact of the Covid-19 pandemic. It is the second financial rating agency to do so, after Moody’s also announced a downgrade this Thursday. In both cases it is at the level of speculative investment.
The agency gave a long-term rating, which assesses TAP’s probability of default. At the same time, S&P downgraded its senior unsecured bond issue rating (375 million euros maturing in 2024) to B, three steps below the November rating.
“This rating review is part of an unprecedented context of imposing government restrictions on the mobility of populations and the rapid deterioration of the global economic environment as a result of the Covid-19 pandemic, which particularly affects the entire air transport sector,” explains TAP in a statement.
The airline’s operation has been heavily affected by the Covid-19 pandemic. It has restricted its operations to just 15 destinations, ceasing to operate in the remaining 75 in which it has operated until now due to the restrictions countries are imposing to halt the coronavirus. The decision, which begins on 23 March, can be reviewed at any time and should last until April 19th, 2020.
For the same reason, this Thursday Moody’s also downgraded several ratings and TAP’s outlook, including the likelihood of default, citing exposure to Brazil, the United States and Europe as an aggravating factor in the Covid-19 outbreak.