New York, November 04, 2022 -- Moody's Investors Service ("Moody's") downgraded Air Methods Corporation's ("Air Methods") ratings, including the Corporate Family Rating (CFR) to Caa3 from B3 and the Probability of Default Rating (PDR) to Caa3-PD from B3-PD. Moody's also downgraded the company's first lien bank credit facility rating to Caa2 from B2, and the senior unsecured notes rating to Ca from Caa2. The outlook remains stable.

The ratings downgrade reflects Moody's view that the company's capital structure will become increasingly unsustainable. Moody's believes that Air Methods' high financial leverage along with Moody's expectation for continued negative free cash flow, partly due to rising interest rates, will not enable the company to successfully refinance its debt obligations that mature in approximately 18 months. The downgrade is also supported by weak year-to-date operating performance driven by the impact of the No Surprises Act on revenues, as well as persistent inflationary pressures such as rising fuel prices and upward wage pressures due to pilot and clinical labor shortages.

Air Methods' first significant debt maturity is in April 2024 when the company's $1.25 billion first lien term loan becomes due. Moody's believes that the company's weak operating performance and difficult refinancing conditions will challenge the company's ability to address its refinancing needs.

Social and governance risk considerations are material to the rating action. With respect to social risks, Air Methods is negatively impacted by both the implementation of the No Surprises Act and persistent labor shortages. With respect to governance, Air Methods faces operational headwinds stemming from inflationary cost pressures, resulting in weak operating performance, high financial leverage and the prospects of an unsustainable capital structure.

So Moody's downgraded them from "Highly speculative" to "Default imminent with little prospect for recovery," yet their stock price is still over $40.  I guess the Moody's assessment didn't affect much. 

I don't understand the statement "The outlook remains stable," though.  The downgrade and rest of the article pretty much point to a bankruptcy reorganization in April 2024, yet "the outlook remains stable?"  Maybe they mean the outlook will remind investors of the smell of where horses were kept overnight?

Word salad, little speculative substance.

"Some folks are born, silver spoon in hand, Lord don't they help themselves, Lord.

But when the tax man come to door, Lord the house lookin' like a rummage sale, yeah."

Even if this is true, it seems VERY convenient timing.

not just look it up?

much sums up a whole lot of investments in the millenial age both personal and busin ss.  Shouldah covered their down side potential realistically.  Tough times ahead, all around.

Much larger companies than Air Methods have suffered similar outcome's.

This  should be no surprise , especially with aviation which is a cash burn with slim margins in a high risk investment arena.  The Lending environment is Toxic at this time and with high interest rates and a weak forecast Borrowers and Lenders are more risk adverse. 

Wouldn't you be?

high risk investment arena, it makes me immediately think you know what you're talking about.

Why did AMC borrow so much?

American Securities acquired of Air Methods for $2.5b using a significant amount of borrowed money to meet the $2.5b cost. The assets of the Air Methods that were acquired were used as collateral for the loans, so effectively Air Methods has debt from the purchase of the company from the previous share holders.

management used the sheets to continuously leverage ongoing acquisitions at breakneck speed alleging the magic of synergies and profits to be reaped.  Oldest line of bull in the book, latest new application is/was crypto currency.  Smoke and mirrors with no value all to keep the 1% in control of the money supply.

A. Todd stated several times during earnings calls that he wanted to maintain debt at no less than 2 times cash flow, no more than 4 times cash flow.  He wanted to maintain a strong balance sheet so the company could take advantage of acquisition opportunitites.  Today, after private "equity" (a bogus term since it is nothing more than a rename of the leveaged buyout shops of the 80's and 90's which "buy" companies with debt), debt is 9 times cash flow (per the Moody's report).

Private "equity" purchased the company at a share price of $43.  At the time, the stock was trading at $28 (and headed down).  Thus, they paid a 50 percent premium for the company.  You have to pay a premium to attract shares from potential sellers, but 50 percent for a company headed the wrong way?  The previous year, the company's stock traded in the $50 range.  You might say private "equity" paid too much and loaded the company up with debt to do the deal.

Smoke and mirrors in action.  Say one thing, do another.  Investors rarely keep up until things are waaaay out of control.  The company churned their sheets to boost the stock price and voila, all management keep being awarded options for stock price appreciation and exercising those appreciated and active ones.

Another form of Ponzi behavior everyone appreciates because they think some day they'll be a recipient.  

Really non-existent value and a setup for failure.  

Same thing happened to some banks after the repeal of Glass-Stegal from '98 onwards.

Oughta be a law against bad behavior.

Would the lender likely sell off whatever assets they could?  Or try to sell it complete?

doesn't need to be sold. you're talking about liquidation. nobody wants to buy debt bro

true.

chapter 11 is reorganization, not liquidation or sale. but your intent was not to inform, either.

intent diviner!