On Dec. 12, 2002, Standard&Poor's Ratings Services lowered its short-term corporate credit and commercial paper ratings on BAE Systems PLC to 'A-2' from 'A-1'. At the same time, Standard&Poor's placed its other ratings on the U.K.-based defense firm, including the 'A-' long-term corporate credit rating, on CreditWatch with negative implications; the 'A-2' commercial paper rating is not on CreditWatch. The actions followed the company's announcement that there were substantial schedule delays and cost overruns on its Astute submarine and Nimrod aircraft contracts (worth about $7 billion, combined). BAE Systems is in discussions with Britain's Ministry of Defense regarding potential modifications to the contracts on these core programs. Although the impact on earnings and cash flow will
