Major defense company, with a portfolio of diverse, high-priority programs and a substantial order backlog; Defense spending should be trending upward over the next few years, especially in the U.S., an important market for BAE Systems; Moderate debt leverage and good liquidity; and Some ability to sell discrete assets to enhance financial flexibility. Poor profitability, with net losses in recent years, leading to subpar credit protection measures; Tighter internal controls and increased focus needed to improve cost and schedule performance of complex programs; and Substantial pension deficit. The ratings on Farnborough, U.K.-based BAE Systems PLC are based on its strong competitive positions in the global defense market, an industry with generally favorable credit characteristics, and good liquidity, partly offset by
