Fitch affirms Fluor

Fitch Ratings said it affirmed ratings for Fluor Corp. at A- for its issuer default rating, its senior unsecured bank facilities and senior unsecured notes. The agency confirmed the rating of F2 for its commercial paper.

The outlook is stable.

According to Fitch, the ratings reflect the company's franchise presence in engineering and construction, diversification of projects, profit history and solid equity base that helps its ability to offset losses. The company gained from its relatively stable construction services businesses and its disciplined bidding and risk management policies that help to maintain adequate gross margins, the agency said. What's more, the company has seen strong growth in revenue and margins and is expected to see continued growth, especially for oil and gas projects.

Ratings also reflect the company's liquidity, which included $1.1 billion in cash and a $1.5 billion committed bank facility due 2011, the agency said. Outstanding debt was $589 million, including $222 million of non-recourse debt for a joint venture project, as of March 31. The bulk of the direct debt is $330 million of convertible senior unsecured notes. The ratings also consider the company's intention to maintain a conservative capital structure and that discretionary spending won't affect debt levels.

For Fitch, concerns are the company's ties to economic cycles, its working capital costs and the industry risk of project losses. Fluor experienced some large write-offs on its work on U.S. embassies and other projects, for instance. But its overall risk management process remains sound, the agency said.

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