The ratings on Farnborough, U.K.-based BAE Systems PLC are based on its strong competitive positions in the global defense market, an industry with generally favorable credit characteristics, offset by modest, albeit improving, profitability and a sizable pension deficit. The ratings also incorporate expectations that the company will restore its credit protection measures by reducing debt materially following the 2005 acquisition of U.S.-based United Defense Industries Inc. BAE Systems is a major supplier of military aircraft, defense electronics, submarines and surface combatants for the Royal Navy, support services, information technology, and aerostructures. The firm's portfolio is diverse and includes a number of high-priority programs. The addition of United Defense created one of the leading suppliers of land combat vehicles and armaments.
