The pandemic felled dozens of stellar credit ratings. CFOs want them back.

Delta Air Lines’ debt is rated investment grade by Moody’s, but not by Fitch and S&P Global. Like many travel companies, Delta’s revenue plummeted in 2020 as lockdown kept people in their home. (Photo by Charly TRIBALLEAU / AFP) (AFP)
Delta Air Lines’ debt is rated investment grade by Moody’s, but not by Fitch and S&P Global. Like many travel companies, Delta’s revenue plummeted in 2020 as lockdown kept people in their home. (Photo by Charly TRIBALLEAU / AFP) (AFP)


Delta, Macy’s and others are among the ‘fallen angels’ that lost their investment-grade halo in 2020. Finance chiefs have been slashing debt and fortifying balance sheets to recoup that ranking.

Dozens of big companies, from Delta Air Lines to Ford Motor and Macy’s, had their debt ratings cut to junk during the pandemic, as entire industries were brought to their knees. Nearly half those companies still have the scruffy rating, and most are trying to work their way back.

Ford has regained its investment-grade rating at two of the three large ratings agencies. Meanwhile, Macy’s and Delta remain “fallen angels," as those downgraded to junk are known, at two of the three agencies.

At Delta, returning to investment-grade is “right at the top" of the priorities’ list, said Chief Financial Officer Dan Janki.

In total, 34 U.S. and European companies lost their higher-grade credit rating at the outset of the pandemic, according to Fitch Ratings, the largest count among the companies Fitch rates since 2006. Roughly a third of those companies are in consumer-facing industries such as airlines, retail and autos. In comparison, during the 2008-2009 financial crisis, 29 companies were downgraded to junk, or high-yield.

Landing in junk territory makes it harder and more expensive to access capital, an added burden as high interest rates have pushed the cost of debt up. It can also signal weakness in a company’s finances. Many large companies pay for ratings from all three of the big agencies—Moody’s Ratings, S&P Global Ratings and Fitch—and aim for investment-grade from at least two if not all three.

Delta, like other air carriers, was hammered by a severe drop in travel during the pandemic and took on billions in debt to combat the effects of losing nearly all sources of revenue and a cash burn of around $100 million a day. Delta retained its investment-grade perch at Moody’s, but lost it at Fitch and S&P Global in 2020.

As a result, Delta’s cost of credit has increased “materially," according to Janki. Delta raised nearly $25 billion in debt in 2020, some of it at rates in the high single-digit range rather than the mid-single digits the airline might have expected had it remained investment-grade, he said. Long-term investors also look at credit ratings in assessing how strong a company’s balance sheet is, especially in a cyclical business like the airline industry, Janki said.

The finance chief has been working to recapture the coveted rating for the last few years, with all excess capital going to pay down debt. So far, Delta has repaid $12 billion of the $25 billion raised in 2020. The hope is that a credit upgrade will happen this year, Janki said. Both Fitch and S&P Global have Delta one notch below investment-grade with a positive outlook, which tends to indicate that a company is likely to be upgraded in the near-term, according to Janki.

“You can’t predict the timing of the agencies," he said of Delta’s wish for an increase. “But I wouldn’t be surprised to see them take action to investment-grade in the back half of the year."

Other large air carriers, such as United Airlines and American Airlines, are in the high-yield outback. Southwest Airlines, meanwhile, has investment-grade ratings from all three agencies.

The swath of downgrades during the pandemic was largely due to how drastic and quick the change in companies’ financials was, said Alex Bumazhny, a Fitch analyst. Though it’s not a decision the rater takes lightly, he said, in 2020 companies loaded themselves with debt and there was general uncertainty on when business might return to normal and what that would look like.

Once downgraded, it takes on average five years for companies to get back to investment-grade, Bumazhny noted, though some do it faster, slower—or not at all. Of the 34 companies that slipped off the top tranche in 2020, just 18 have regained their investment-grade footing, he said.

Ford recouped its investment-grade title last year from all but Moody’s, after over three years in the high-yield pool.

Macy’s lost its investment-grade rating in February 2020, just before the pandemic arrived and laid waste to retailers in general. Since then, Macy’s has worked toward a healthier balance sheet by paying down debt and stabilizing cash flows, executives have said, and it returned to investment-grade status at Fitch in 2022.

But other companies that slipped badly in the pandemic are still rated beneath investment-grade by most or all three of the agencies, and their road back may be long.

Cruise operator Carnival aims to return to investment-grade metrics in 2026. The company had a strong investment rating of A- before cruises came to a halt in 2020, said Finance Chief David Bernstein. That A- isn’t necessarily the current target, but the aim is to land above the lowest investment-grade rating, he said. “We’re looking to be better than that, but we do have a couple of years to decide exactly what our target will be."

To get there, Carnival is working to simplify its capital structure, refinancing where possible as well as moving toward only unsecured debt and prepaying debt to cut interest expenses, the CFO said. Carnival has prepaid $2.6 billion in debt so far this year. Total debt at the end of the second quarter, which goes through May, is expected to be $29 billion, the company said.

“We are making progress," Bernstein said. “We are beginning the road back."

The pandemic didn’t only knock companies habituated to investment-grade off the roster. It also knocked sideways others that were closing in on attaining the coveted rating.

At the end of 2019, Norwegian Cruise Line Holdings was poised for a rise to investment-grade, recollects CFO Mark Kempa. The pandemic upended that, and roughly four years later, the cruise company is working to clean up its balance sheet by paying down debt and cutting costs. Investment-grade may come eventually. Or maybe something close.

“We’re not committing one way or the other, but at a minimum, we want to be investment-grade-like," Kempa said. “We’ll see over the next 24 months. Maybe we just come out and target and say we want to be investment-grade, but if I can have the benefits of being investment-grade at only being investment-grade-like, it’s a good spot to be in."

Write to Jennifer Williams at

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