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Rolls-Royce was upgraded to BB from BB- by Fitch upon the improvement of its credit metrics. The rating agency expects them to continue improving in the short-to-medium term. Its EBIT and EBITDA margins are set to further improve and cross 8% and 13% in 2023 vs. 4.5% and 10.2% in 2022 respectively. They also expect its free cash flows to “materially improve” given the uptick in its civil aerospace business and cost structure improvements. Also, its leverage metrics are improving and they are expected to make the repayment on its €550mn bond 0.875% bond due 2024. This, alongside its “strong liquidity position” totaling £7.4bn ($9bn) at end-June posits them to meet its dues and supports its rating. Besides, Rolls Royce has a strong order backlog across all divisions that will further benefit revenues.
Rolls-Royce’s dollar bonds inched higher with its 3.625% 2025s up 0.2 points to 93.92, yielding 6.92%.