Onex's purchase of WestJet prompts Moody's credit ratings review for possible downgrade

WATCH ABOVE: (From May 13, 2019) Calgary based Westjet has been purchased by Onex Corporation in a multi-billion dollar deal. Heather Yourex-West reports.

Onex Corp.’s purchase of WestJet Airlines Ltd. has prompted Moody’s Investors Service to place two of the carrier’s credit ratings under review for possible downgrade.

The rating agency says it expects Onex to download some of the $5-billion acquisition cost, which includes debt, onto WestJet when the deal closes. Such a move would increase the airline’s adjusted leverage, though WestJet has no room in its current rating for any increase, Moody’s said Tuesday.

READ MORE: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

The review will examine WestJet’s capital structure and any change in business strategy.

The all-cash deal, announced Monday, will see Toronto-based Onex take WestJet private after 20 years on the Toronto Stock Exchange.

Onex managing director Tawfiq Popatia told The Canadian Press yesterday that the private equity firm plans to stick to WestJet’s current trajectory, with no major strategy shifts in the works.

READ MORE: Meet the wealthy Canadian behind Onex and the deal to buy WestJet

On Tuesday, WestJet chief executive Ed Sims told reporters that going private would relieve the Calgary-based company of the constant scrutiny that attends publicly held companies.

“I compare it to a farmer who’s constantly pulling up his or her radishes, wondering how well they’re growing, and then wondering why they’re not growing on a sustainable basis,” Sims said at WestJet headquarters Tuesday morning, before news of the Moody’s review broke.

“We now have the ability to focus on our long-term strategy to deliver against the lifetime of our assets.”

READ MORE: WestJet buyout: From rewards to travel plans, what to know about Onex’s $5B deal

Watch below: Some Global News videos about WestJet.

Sims reiterated that none of WestJet’s 14,000 jobs would be on the chopping block as a result of the purchase.

“What we are clear on with Onex is that they have not spent $5 billion on this entity to try to shrink their way to prosperity,” he said.

As to the origins of the deal, he said: “Onex called us.”

Moody’s said its review will wrap up around the time the transaction closes later this year or in early 2020.

© 2019 The Canadian Press

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