AA share price leaps as rating agency surprises on “terminal” debt pile

Troubled breakdown firm AA was today delivered a huge boost by a leading credit rating agency.

Facing a prospect of a downgrade which could be “terminal” for shareholders, S&P refrained lowering its opinion of the AA.

Shares leapt almost five per cent after credit decision was announced.

Weighed down by almost £3bn of corporate bonds analysts had feared a downgrade of just one notch would have “severe free cash flow implications”.

But today S&P reaffirmed a BBB- rating of the AA’s class A notes and a B+ rating on the class B2 debt.

Read more: City raises concerns a credit downgrade could be “terminal” for the AA

AA finance chief Martin Clarke said he was “pleased” to hear the S&P decision.

“[This confirms] the resilient and low-risk nature of our balance sheet as well as the credit-enhancing characteristics of the whole business securitisation,” he said.

Fracas

Shares in the AA dived in February as the company revealed its transformation plan – one that included a large pivot towards the insurance sector. It has been a savage nine months for the breakdown giant, one that has seen its market value more than half.

The trigger last summer was the shock departure of boss Bob Mackenzie after a bizarre physical fracas with a fellow board member during a company away day at the luxurious Pennyhill Park in Surrey.

Clarke continued today:

The strategy set out in February will allow the AA to stabilise and grow Roadside and accelerate growth in Insurance, to create shareholder value and, in time, de-lever.

We are committed to maintaining a disciplined and proactive approach to our capital structure and to delivering long-term growth for bond and equity holders.

Read more: The AA has broken down. Can its new boss get the company back on track?