Major defense company, with a portfolio of diverse, high-priority programs and a substantial order backlog; Generally favorable defense industry credit characteristics; and Good liquidity. Elevated debt levels incurred to finance the acquisition of U.S.-based United Defense Industries Inc.; Sizable pension deficit; and Modest profitability of some operations. The ratings on Farnborough, U.K.-based BAE Systems PLC reflect its strong competitive positions in the global defense market, an industry with generally favorable credit characteristics, and good liquidity, offset by modest, albeit improving, profitability and a sizable pension deficit. The ratings also incorporate expectations that BAE Systems will restore its credit protection measures by reducing debt following the 2005 acquisition of U.S.-based United Defense Industries Inc. and by strengthening overall financial performance. BAE
