Research Update: Rolls-Royce PLC Downgraded To 'BB'; Outlook Negative

The COVID-19 pandemic continues to severely disrupt global air travel, and most airlines have grounded their fleets. Airbus and Boeing have recently announced that they are making deep cuts to wide-body aircraft production rates, due to an anticipated reduction in demand for these aircraft in the coming years. Rolls-Royce PLC's civil aerospace division will be materially affected by lower wide-body and business jet engine sales and lower engine flying hour related receipts from airlines in 2020 and 2021. Its group profitability, cash flow, and credit metrics will be negatively affected. At the same time, the group is maintaining a strong liquidity position through proactive treasury management. We expect the company to materially underperform against our previous base case, and are

...- The COVID-19 pandemic continues to severely disrupt global air travel, and most airlines have grounded their fleets. Airbus and Boeing have recently announced that they are making deep cuts to wide-body aircraft production rates, due to an anticipated reduction in demand for these aircraft in the coming years. - Rolls-Royce PLC's civil aerospace division will be materially affected by lower wide-body and business jet engine sales and lower engine flying hour related receipts from airlines in 2020 and 2021. Its group profitability, cash flow, and credit metrics will be negatively affected. At the same time, the group is maintaining a strong liquidity position through proactive treasury management. - We expect the company to materially underperform against our previous base case, and are therefore removing our CreditWatch placement on Rolls-Royce and lowering our long- and short-term issuer credit ratings on the company to '##/B' from '###-/A-3'. The outlook is negative. - The negative...

Research Update