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

Despite management's ongoing positive actions, U.K.-based engine manufacturer Rolls-Royce PLC reported weaker-than-expected core operating cash flows at its half-year results as at June 30, 2019. At the same time, Rolls-Royce reported an additional £100 million charge for the Trent 1000 platform (spread over three years) and a further £59 million impairment on the Trent 900, and it continues to recognize and accelerate restructuring cash costs as it works to lower its headcount and cost base. We now forecast that Rolls-Royce's profitability and credit metrics will recover more slowly versus our previous expectations, and are therefore lowering our long-term issuer credit and issue ratings on Rolls-Royce to 'BBB' from 'BBB+'. The negative outlook indicates that Rolls-Royce faces elevated event risk versus

...- Despite management's ongoing positive actions, U.K.-based engine manufacturer Rolls-Royce PLC reported weaker-than-expected core operating cash flows at its half-year results as at June 30, 2019. - At the same time, Rolls-Royce reported an additional ú100 million charge for the Trent 1000 platform (spread over three years) and a further ú59 million impairment on the Trent 900, and it continues to recognize and accelerate restructuring cash costs as it works to lower its headcount and cost base. - We now forecast that Rolls-Royce's profitability and credit metrics will recover more slowly versus our previous expectations, and are therefore lowering our long-term issuer credit and issue ratings on Rolls-Royce to '###' from '###+'. - The negative outlook indicates that Rolls-Royce faces elevated event risk versus peers in the potential event of a no-deal Brexit, specifically with regard to the civil aerospace engines that Rolls-Royce exports from the U.K. to its major customer Airbus in...

Research Update