Research Update: Rolls-Royce PLC Downgraded To 'BB-' And Placed On CreditWatch Negative

The COVID-19 pandemic continues to disrupt global air travel severely, with a steep reduction in flying hour receipts and lower demand for wide-body engines negatively affecting Rolls-Royce PLC's results. In the six months to June 2020, Rolls-Royce posted a loss before tax of about £5.4 billion and negative free cash flows of about £2.8 billion. We forecast that Rolls-Royce's S&P Global Ratings-adjusted debt will rise to about £6.6 billion by Dec. 31, 2020, as the group continues to issue new debt to bolster its cash position, and will rise again through 2021 as the group continues to post negative free cash flow. Rolls-Royce's free cash flow generation and therefore deleveraging prospects for the next 12 months are also materially below

...- The COVID-19 pandemic continues to disrupt global air travel severely, with a steep reduction in flying hour receipts and lower demand for wide-body engines negatively affecting Rolls-Royce PLC's results. - In the six months to June 2020, Rolls-Royce posted a loss before tax of about ú5.4 billion and negative free cash flows of about ú2.8 billion. We forecast that Rolls-Royce's S&P Global Ratings-adjusted debt will rise to about ú6.6 billion by Dec. 31, 2020, as the group continues to issue new debt to bolster its cash position, and will rise again through 2021 as the group continues to post negative free cash flow. - Rolls-Royce's free cash flow generation and therefore deleveraging prospects for the next 12 months are also materially below our previous base case and will place further pressure on the group's credit metrics and liquidity. - We are therefore lowering our long- and short-term issuer credit ratings on Rolls-Royce to '##-/B' from '##/B' and placing them on CreditWatch with...

Research Update