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Bond Market News
Rolls-Royce Returns to IG-Status on Upgrade to Baa3
August 15, 2024
Rolls-Royce was upgraded to Baa3 from Ba1 by Moody’s, citing its continued strong financial performance, with its outlook remaining stable. The upgrade marks its return to IG-status after having fallen into the junk grade category in July 2020, during the height of the pandemic. Moody’s notes that the company’s credit quality has improved materially in 1H2024 due to a significant increase in adjusted operating profits to £1.15bn ($1.48bn) vs. £700mn ($898mn) a year earlier. Besides, Rolls-Royce used existing cash to repay a €550mn ($605mn) note in May and is expected to continue prioritizing balance sheet strength. Its adjusted gross debt-to-EBITDA was at 1.9x for the twelve months ended 30 June 2024, with adjusted free cashflows of £2.1bn ($2.69bn) during the same period.
Rolls-Royce’s dollar bonds were trading steady, with its 3.625% 2025s at 97.8, yielding 5.6%.
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