S&P may cut Finmeccanica

Standard & Poor's said it placed the BBB long-term and A-2 short-term corporate credit ratings on Finmeccanica SpA on CreditWatch with negative implications.

This follows the group's bid to buy DRS Technologies Inc. (BB-/stable) for $81 per share in cash. The deal is valued at $5.2 billion (€3.4 billion), including $1.2 billion in net debt.

The watch reflects the increase in debt required to fund the acquisition, which could place financial ratios under pressure at the BBB rating level, according to the agency.

S&P said it expects financial risk to be partially mitigated by an equity issue and asset divestitures, accounting for about two-thirds of the $5.4 billion enterprise value of the DRS deal.

Ratings are supported by Finmeccanica's highly diversified positions in the European aerospace and defense industry, favorable business mix and moderate financial policy, the agency said.

Ratings are constrained by some reliance on the domestic Italian military market, the group's modest but improving level of profitability and the weaker business positions of some of its cyclical noncore activities, S&P said.

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