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Rating Action:

Moody's upgrades Spirit Aerosystems' CFR to Ba2, upgrades amended facilities and unsecured note

07 Oct 2010

Approximately $1.3 billion of rated debt affected

New York, October 07, 2010 -- Moody's Investors Service has upgraded Spirit Aerosystems, Inc's ("Spirit") Corporate Family and Probability of Default ratings to Ba2 from Ba3. Concurrently, the company's proposed amended and extended senior secured bank facilities were upgraded to Ba1 from Ba2 and the senior unsecured note to B1 from B2. The ratings outlook is stable.

RATINGS RATIONALE

The company's proposed amendment and extension of its bank credit facilities will extend the maturity of the revolver to September 30, 2014 (those not extending will maintain June 30, 2012 maturity) and increase the aggregate size to $500 million (currently $408.9 million) . The amendment and extension of the company's term loan will create two tranches, one maturing September 30, 2013 (Term Loan B-1), a second maturing September 30, 2016 (Term Loan B-2). Final composition will be determined at the close of the amend and extend transaction based on lender participation.

The upgrade of the Corporate Family Rating to Ba2 from Ba3 is reflective of the company's strong credit metrics and operating margins, improvement in the debt maturity profile, as well as the substantial order backlog in the context of an increasing production build rate, notably on the high volume Boeing 737 platform and ramp up of B787, with expectation that B787 end customer deliveries will commence in the first quarter of 2011. Moody's believes that with the return to record global revenue passenger miles, increased airline profitability, and expectation for continued RPM growth, the industry is poised for OEM production levels to remain strong through at least 2013. Given Spirit's leading Tier-1 aerostructures position, most notably with Boeing's commercial aircraft platforms and increasingly important role with Airbus (including A350), Moody's believe that Spirit will realize revenue and earnings growth for at least the next several years. Moody's also however recognizes that increased production rates, on-going development costs and the delays in customer delivery of the B787 have, and will continue to, pressure working capital. This, combined with expected high levels of capital expenditures necessary to expand capacity (including for the B787 and A350), will result in significant negative free cash flow generation through much of 2011. That said, once working capital stability is achieved, combined with expected increase in operating income and reductions in capital expenditures, Spirit will be positioned to generate substantial free cash flow and to reduce leverage.

Although a near term upgrade is unlikely, the rating could improve if the company demonstrates sustainable positive free cash flow generation with improving credit metrics, evidence successful execution of new platform development and maintain a strong order backlog.

The ratings and outlook could be pressured if Spirit is unable to sustain solid free cash flow as production of B787 ramps up to Boeing's target production rates, including consistent progress to FCF of 10%, or if its liquidity profile weakened for any reason.

The following ratings/assessments have been affected:

Corporate Family, upgraded to Ba2 from Ba3;

Probability of Default, upgraded to Ba2 from Ba3;

senior secured revolving credit facility due June 2012, upgraded to Ba1 (LGD3, 39%) from Ba2 (LGD3, 38%);

senior secured revolving credit facility due September 2014, assigned Ba1 (LGD3, 39%);

senior secured term loan due September 2013, upgraded to Ba1 (LGD3, 39%) from Ba2 (LGD3, 38%);

senior secured term loan due September 2016, assigned Ba1 (LGD3, 39%);

7.5% senior unsecured notes due 2017, upgraded to B1 (LGD5, 86%) from B2 (LGD5, 86%).

The last rating action for Spirit Aerosystems, Inc. was on September 21, 2009 when the company's PDR was upgraded to Ba3 and senior secured bank credit facilities upgraded to Ba2. A B2 was assigned to the company's senior unsecured notes. The company's CFR was affirmed at Ba3. For more information see credit opinion.

The principal methodologies used in rating Spirit Aerosystems, Inc. were Global Aerospace and Defense published in June 2010, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Spirit Aerosystems, Inc., headquartered in Wichita, KS, with facilities in Wichita, KS, Tulsa and McAlester OK, Kinston, NC, Prestwick, Scotland, Samlesbury, England and Kuala Lumpur, Malaysia, is a designer and manufacturer of fuselages, pylons, struts, nacelles, thrust reversers, wing assemblies and other complex components for commercial aircraft and business jets. 7/01/10 LTM revenue for Spirit approximated $4.2 billion.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's upgrades Spirit Aerosystems' CFR to Ba2, upgrades amended facilities and unsecured note
No Related Data.
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