7th Apr 2020 13:47
(Alliance News) - Moody's Investors Service on Tuesday has assigned a Baa2 rating to the proposed new senior unsecured notes due 2030 to be issued by aerospace company BAE Systems PLC.
BAE's long term issuer rating of Baa2 is unaffected by the issuance, as are the Baa2 ratings of the existing senior unsecured instruments issued by BAE, Moody's said.
The outlook is also unchanged and remains stable, the ratings agency said.
Moody's said the rating action reflects BAE's planned issuance of senior unsecured notes, the proceeds of which will be applied to fund part of BAE's post-employment benefit plans deficit.
The Baa2 ratings reflect the company's large scale and long-term defence contracts, and its position as a critical defence supplier to the US and Saudi Arabian governments, and a strategic supplier to the UK government.
In addition, Moody's said the ratings reflect BAE's "highly" diversified product base, growth profile as existing programmes mature, and high proportion of stable support and services revenue.
Meanwhile, the ratings agency said the stable outlook reflects the company's strong business profile and Moody's expectations that BAE will reduce leverage over the next 12 to 18 months.
Looking ahead, Moody's said the ratings could be upgraded if the company's Moody's-adjusted operating margins increase above 10%. An upgrade would also require BAE to demonstrate restraint on shareholder return initiatives, including dividends and large acquisitions, along with prospects of preserving strong liquidity.
In contrast, Moody's said the ratings could be downgraded if there are significant execution issues on key platforms or indications that the company may no longer be a critical supplier to the US or the UK governments. A downgrade could also occur if there is a weakening in financial profile either from a deterioration in operating performance, aggressive shareholder return initiatives or material acquisitions, Moody's said.
BAE shares were trading 4.2% higher in London on Tuesday at 538.40 pence each.
By Evelina Grecenko; [email protected]
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