Research Update: L3Harris Technologies Inc. Outlook Revised To Negative On Proposed Aerojet RocketDyne Acquisition, 'BBB' Rating Affirmed

L3Harris Technologies Inc. recently announced that it plans to acquire Aerojet Rocketdyne Holdings Inc. for $4.7 billion, which it will fund mainly with the proceeds from new debt. The transaction will initially weaken the company's credit measures, though we forecast they will improve as it pays down debt and increases its earnings. We also expect the acquisition to modestly improve L3Harris's program diversity, and provide access to growing rocket propulsion markets though this will be insufficient to offset the increase in its leverage. Therefore, we revised our outlook on the defense company to negative from stable and affirmed our ratings, including our 'BBB' long-term issuer credit ratings and 'A-2' short-term rating. The negative outlook reflects that L3Harris's credit ratios may

...- L3Harris Technologies Inc. recently announced that it plans to acquire Aerojet Rocketdyne Holdings Inc. for $4.7 billion, which it will fund mainly with the proceeds from new debt. The transaction will initially weaken the company's credit measures, though we forecast they will improve as it pays down debt and increases its earnings. - We also expect the acquisition to modestly improve L3Harris's program diversity, and provide access to growing rocket propulsion markets though this will be insufficient to offset the increase in its leverage. - Therefore, we revised our outlook on the defense company to negative from stable and affirmed our ratings, including our '###' long-term issuer credit ratings and 'A-2' short-term rating. - The negative outlook reflects that L3Harris's credit ratios may not improve as we expect within the next 12-24 months if it does not build up a sufficient amount of cash ahead of the transaction or pay down a sufficient level of debt thereafter....

Research Update