Research Update: Rolls-Royce PLC 'BB-' Ratings Affirmed; Off CreditWatch Negative; Outlook Stable

Despite challenging conditions in the civil aerospace market due to the COVID-19 pandemic, Rolls-Royce PLC has made good progress with restructuring its business, reducing costs, and slowing the rate of cash burn. We expect that the operating performance in Rolls-Royce's defense business will remain robust and that its power business will continue to recover through 2022. As such, we expect that Rolls-Royce's profitability will improve and that the group's free cash flow (FCF) will turn positive on an annualized basis in 2022. Rolls-Royce has announced several disposals, including of ITP Aero, Bergen Engines, Civil Nuclear Instrumentation&Control, and AirTanker Holdings, which means that management looks set to achieve its target of realizing £2 billion of disposal proceeds, thereby substantially

...- Despite challenging conditions in the civil aerospace market due to the COVID-19 pandemic, Rolls-Royce PLC has made good progress with restructuring its business, reducing costs, and slowing the rate of cash burn. - We expect that the operating performance in Rolls-Royce's defense business will remain robust and that its power business will continue to recover through 2022. - As such, we expect that Rolls-Royce's profitability will improve and that the group's free cash flow (FCF) will turn positive on an annualized basis in 2022. - Rolls-Royce has announced several disposals, including of ITP Aero, Bergen Engines, Civil Nuclear Instrumentation & Control, and AirTanker Holdings, which means that management looks set to achieve its target of realizing ú2 billion of disposal proceeds, thereby substantially bolstering the balance sheet and credit metrics. - We have therefore affirmed our '##-/B' long- and short-term issuer credit ratings on Rolls-Royce and removed them from CreditWatch negative....

Research Update