S&P lowers DynCorp to negative

Standard & Poor’s said it affirmed the B corporate credit rating on DynCorp International Inc. and revised the outlook to negative from stable.

The agency also said it revised the recovery rating on the company’s secured debt to 1 from 2, indicating 90% to 100% expected default recovery. As a result, S&P said it raised the rating on the debt to BB- from B+.

The company’s unsecured debt rating remains unchanged at CCC+ with a 6 recovery rating, indicating 0 to 10% expected default recovery.

The outlook revision reflects the potential that the company’s credit metrics could worsen because of difficult operating conditions, including troop withdrawals in Afghanistan and increased price competition for new awards, S&P said.

The agency said it continues to expect DynCorp to generate positive cash flow over the next two years, although less than previously expected.

However, it is unclear whether this will be enough to offset the impact of lower earnings on key credit metrics, S&P said.

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