Moody’s raise BAE ratings

BAE Systems PLC has had its outlook raised to stable from negative by ratings agency Moody’s.

The change in outlook reflects a combination of reduced debt, positive prospects for increased cash flow in light of recent contract awards, and reduced uncertainty regarding the impact of BAE’s recommendation to its shareholders to approve the sale of its 20 interest in Airbus SAS, according to Moody’s.

The negative outlook had been in place since April 2005 when BAE announced its intention to acquire United Defense Industries (UDI). The increased debt burden and high multiple paid for UDI were expected to place stress on the company’s cash flow to debt profile, which were already considered weak for the rating category.

Also, many questions around the sale of its 20 pct ownership interest in Airbus had added uncertainty.

Whilst many may have questioned the sanity of BAE earlier in the year, it seems that with further delay of the A380 announced yesterday and BAE’s thrust into the US market should strengthen its hand further down the line.