S&P: Firth Rixson on positive watch

Standard & Poor’s said it placed Firth Rixson (Cyprus) Ltd.’s B corporate credit rating on CreditWatch with positive implications.

The CreditWatch placement follows news that higher-rated Alcoa Inc.’s plans to buy Firth Rixson for $2.85 billion with an additional $150 million potential earn-out, S&P said.

The agency said it expects that all of Firth Rixson’s outstanding debt will be repaid as part of the transaction.

The transaction is subject to the customary regulatory approvals and the companies expect that it will close by late 2014.

Firth Rixson benefits from high barriers to entry into the aircraft-engine parts industry, along with efficient operations and good customer and geographic diversity, S&P said.

The company has high debt leverage partly due to a large amount of preferred stock considered a debt equivalent, the agency said, and is expected to only generate limited free cash flow in the next two years due to elevated near-term capital expenditures to support new projects.

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