S&P puts Vought Aircraft on negative watch

Standard & Poor's said it placed Vought Aircraft Industries Inc.'s B+ corporate credit rating, B+ senior secured debt rating and B- senior unsecured debt rating on CreditWatch with negative implications to reflect the company's higher-than-expected losses despite a fairly strong recovery in the commercial aerospace market and efforts to improve profitability.

In the first quarter of 2006, Vought had an operating loss of $35 million, similar to the same period in 2005, following a $175 million operating loss for the full year of 2005. Adjusted EBITDA, as defined in the company's credit agreement, declined to $36 million in the quarter from $49 million in the 2005 period. However, S&P said this measure adds back numerous charges related to the company's consolidation efforts, investment in the 787 program and other items.

The agency said that, overall, Vought's financial profile is very weak. In 2004, the company announced a facilities consolidation plan to reduce capacity and improve profitability. This plan has been suspended due to higher-than-expected costs and a change in market conditions for certain programs. The company recently announced that it is eliminating 600 positions, which is expected to save $40 million a year. Although revenues increased 20% in the quarter, sales related to commercial aircraft increased only 3%.

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