Latam Airlines Group SA dropped to a six- year low after Raymond James & Associates said the debt-laden carrier may have to sell new shares if it fails to improve operations.

The company declined 2 percent to 5,320 pesos at 2:46 p.m. in Santiago, the lowest price on a closing basis since April 2009, in its ninth consecutive daily drop. The IPSA benchmark of stocks traded in Chile climbed 0.5 percent.

Raymond James lowered its recommendation to the equivalent of sell from hold, citing the debt load, weak demand for flights in Brazil and the strong dollar’s erosion of revenue. The carrier’s ratio of debt relative to trailing 12-month earnings before items is 6.97 times, higher than 82 percent of its peers, data compiled by Bloomberg show.

“With over 50 percent of Latam’s passenger and cargo revenue driven by Brazil point of sale, the weak economy is expected to be a significant drag on results,” Savanthi Syth, an analyst at Raymond James, said in a research note March 16.

While Raymond James doesn’t foresee immediate liquidity risk, Syth wrote that the company “may need to raise capital if things get much worse.”

Analysts surveyed by Bloomberg expect Latam to return to profit after four consecutive quarters of losses when it reports results after the market closes March 17. The company was formed in 2012 through the merger of Chile’s Lan Airlines and Brazil’s Tam Airlines.

Costa Verde Aeronautica SA, a holding company through which Chile’s Cueto family owns 19 percent of Latam, is selling about $180 million in new shares as parts of a rights issuance, according to a filing with the Santiago exchange March 12.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Dennis Fitzgerald.

This article was written by Eduardo Thomson from Bloomberg and was legally licensed through the NewsCred publisher network.

Tags: latam
Photo Credit: Passengers board a TAM flight at Cataratas International Airport. Deni Williams / Flickr