Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Announcement:

Moody's affirms EADS' A1 rating following France's sovereign downgrade; stable outlook

Global Credit Research - 20 Nov 2012

New York, November 20, 2012 -- Moody's Investors Service has today affirmed the A1 long-term debt ratings for European Aeronautic Defence & Space Co. EADS ("EADS" or "the company"). Despite its recent decision to change the sovereign rating for the government of France to Aa1 (negative) from Aaa (negative), as announced on 19 November 2012, Moody's has affirmed EADS' long-term debt ratings because it has raised the company's fundamental underlying baseline credit assessment (BCA) to a3 from baa1. Moody's has raised EADS' BCA to reflect its expectation that the company will demonstrate ongoing positive operating momentum and an improving credit profile over the forward 18- to 24-month rating horizon. The outlook for the ratings remains stable.

The higher BCA -- a measure of the company's fundamental standalone credit profile in the absence of any support from its government owners -- primarily reflects Moody's belief that (1) EADS will be able to successfully execute on its planned increases in commercial production rates, and thereby convert its substantial backlog into higher levels of aircraft deliveries and cash flows over the next 12-24 months, (2) problems related to multiple developmental programs have mostly been addressed, and (3) the company's resulting key credit metrics will subsequently be bolstered further by the improving profitability and cash flow profile over the extended rating horizon.

At two notches of lift above the revised BCA of a3, the A1 long-term debt ratings for EADS are also now more solidly positioned within the rating category, reflecting the assumptions of ongoing implicit strong support from and low default dependence with the government of France under Moody's government-related issuers (GRI) methodology.

RATINGS RATIONALE

The ratings broadly reflect (1) EADS' strong market position as a leader in aircraft production (airplanes, helicopters), with a sizeable and growing asset base; (2) the long-term revenue visibility associated with the company's very large backlog of orders, totaling nearly EUR550 billion (albeit at list vs. contractual selling prices); and (3) the financial flexibility afforded to EADS by its sizeable net cash position and strong overall liquidity profile. The ratings continue to be constrained, nonetheless, by the company's weak operating margins and asset returns, along with moderate business diversification and some ensuing risk related to its future governance and strategic objectives.

Moreover, in accordance with Moody's GRI rating methodology, the ratings also incorporate the combination of the following inputs: (1) the company's a3 BCA; (2) the Aa1 local currency rating (negative outlook) for the government of France (the supporting government of EADS, with a stake of approximately 15%); and (3) Moody's assessment that EADS has "low" default dependence with the French government and benefits from "strong" implicit support from the French government.

In particular, Moody's anticipates that EADS' A380 and A400M programs will be less cash absorptive going forward. Although these programs will likely continue to consume capital -- especially the A380, which has an issue with cracks appearing in the wing ribbing and for which EADS expects to incur incremental charges approximating EUR260 million in 2012 -- the company's cash requirements are expected to be much lower than in previous years. In addition, the company's A350XWB development program -- delayed by another three months, with entry-into-service now scheduled for the third quarter of 2014 -- will require considerable investment as production ramps up over the coming years. Taken together, these large cash outflows, coupled with normal course volatility in order rates and associated pre-delivery payments, could render EADS free cash flow negative for the year and slow the company's anticipated growth and full free cash flow generating ability over the near term.

However, Moody's expects EADS to be able to more than offset these constraining factors with the strong cash flows that the company is likely to generate from its older, in-production commercial aircraft programs (A320, A330). The production rates for these programs have either recently ramped up (A320, to a record high 42/month during the fourth quarter of 2012) or are scheduled to do so (A330, to 10/month by April 2013, and possibly 11/month by 2014). Development costs for the A320neo (the fastest-selling plane in Airbus' history, with expected entry-into-service during the second half of 2015) should be manageable and fully accommodated within EADS' financial profile.

Moody's believes EADS will be able to successfully execute on its scheduled commercial production ramp-ups and convert its substantial backlog into higher levels of aircraft deliveries and cash flows over the next 12- to 24-months, a key factor underpinning the higher BCA. This expectation is despite the rating agency's concerns regarding supply-chain management and further potential disruption therein, along with some ongoing risk related to the availability of aircraft financing and requisite international capital markets development.

Moody's notes that several of EADS' key credit metrics are already greatly improved from last year, particularly its debt/EBITDA, which now stands at around 2.0x, and its retained cash flow/debt, which approximates 44%. Moreover, Moody's anticipates that EADS will achieve further improvements in most of its quantitative credit metrics over the --next two years. The rating agency considers that EADS will make slow progress towards achieving operating margins that are more comparable to those of peers (i.e., high single-digit levels). However, any future upward migration of the company's long-term ratings will be dependent on it achieving such margins.

WHAT COULD CHANGE THE RATING UP/DOWN

Although Moody's does not consider a rating upgrade to be likely over the extended rating horizon, the rating agency could upgrade EADS' rating if the company evidenced measured operating performance improvements such that, on a sustained basis, it demonstrated (1) high single-digit operating margins (now at around 4%), (2) debt/EBITDA of less than 1.5x, and (3) meaningful free cash flow generation while continuing to deliver on its new programs and maintaining a strong liquidity profile.

Conversely, negative rating pressure could arise as a result of (1) a reversal of recent favorable trends and an accompanying deterioration in EADS' operating profitability, and/or (2) a lack of steady progress by the company towards achieving operating margins at least in the mid-single digits in percentage terms. Negative rating pressure could also result if (1) there was an acceleration in aircraft cancellations that significantly curtailed EADS' sizeable backlog, and/or (2) the company experienced further production problems with any of its large programs and a strong liquidity profile was not maintained.

PRINCIPAL METHODOLOGY

The principal methodology used in rating EADS was Moody's Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include the Government-Related Issuers: Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Toulouse, France, EADS is a leading aerospace company through its principal Airbus operating subsidiary (approximately two-thirds of revenue and growing), which is one of only two global producers of large commercial airplanes (Boeing, A2 stable, being the other). Eurocopter (the world's largest helicopter maker), Cassidian (defence and security) and Astrium (military telecommunications and ballistic missiles) provide some diversification, although EADS is principally exposed to the commercial aviation cycle. EADS had turnover of approximately EUR54 billion during the 12-month period ended September 2012.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms EADS' A1 rating following France's sovereign downgrade; stable outlook
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: