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Bond Market News
Rolls-Royce Upgraded to BBB+ and Baa2 by Fitch and Moody’s
March 7, 2025
Rolls-Royce was upgraded by two notches to BBB+ from BBB- by Fitch. It was also upgraded to Baa2 from Baa3 by Moody’s. The upgrade by both the rating agencies come on the back of Rolls-Royce’s improving credit quality, driven by strong profitability and cash flow growth, primarily from its Civil Aerospace division. In 2024, the company’s operating profit rose 56% YoY to £2.5bn ($3.2bn) while its free cash flow increased to £2.4bn ($3.1bn) from £1.3bn ($1.7bn). Rolls-Royce anticipates adjusted operating profit to grow toward £2.8bn ($3.6bn) in 2025, with all core divisions contributing to organic growth. The company remains focused on strengthening its balance sheet, using cash to repay debt and carrying no net debt by the end of 2024. The company has no plans to increase leverage for shareholder distributions, maintaining financial flexibility for strategic opportunities.
Its bonds traded stable with its 5.75% 2027s at 102.1, yielding 4.81%.
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