25th Sep 2020 21:57
(Alliance News) - Moody's Investors Service on Friday downgraded Rolls-Royce Holdings PLC's corporate family rating, offering a bleak outlook for the jet engine maker's balance sheet should it not turn to fundraising.
Rolls-Royce's CFR rating was nudged down to Ba3 from Ba2, with the outlook remaining negative.
"Today's rating action reflects a worsening outlook for recovery of flight hours and deliveries in the company's large commercial engine division over the remainder of 2020 and in 2021," Moody's said.
The Covid-19 pandemic has sapped demand for air travel and emptied skies, hurting both carriers and aftermarket providers such as Rolls-Royce.
The ratings added that the company's expectations for cash outflows in 2020 and 2021 are at the "higher end of Moody's estimates".
This "could put pressure on liquidity and balance sheet metrics in the absence of further finance raising".
Rolls-Royce earlier on Friday noted what it called "continued media speculation" regarding the possibility of undertaking a fundraising, but the jet engine maker said that no final decision had been taken.
Sky News reported on Friday afternoon that the Kuwait Investment Office was in talks with the Trent 1000 engine maker about its potential GBP2.5 billion fundraising. In addition, the Financial Times, citing three people with direct knowledge of the matter, had reported on Sunday that Rolls-Royce was in talks with sovereign wealth funds, including Singapore's GIC, to raise GBP2.5 billion in October.
Moody's said there are concerns a fundraise "would not be sufficient to maintain a balance sheet commensurate with a Ba2 rating", another reason for Friday's downgrade.
Rolls-Royce shares closed up 3.1% at 154.75 pence on Friday but are down 77% so far in 2020.
By Eric Cunha; [email protected]
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