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S&P raises Rolls-Royce
S&P said it upgraded its ratings for Rolls-Royce plc and its senior unsecured notes to BB+ from BB. The recovery rating on the notes remains 3.
“Rolls-Royce's affirmation of its 2023 guidance on FOCF generation and our expectations for 2024 and 2025 are key factors for the upgrade. Following Rolls-Royce's Capital Markets Day, where it discussed the outcome of the strategic review, the group affirmed its guidance for 2023 that it originally announced at the first half 2023 results. As such, we expect FOCF generation this year to exceed £900 million, and we forecast this to rise to about £1.4 billion-£1.6 billion in 2024 and toward £1.8 billion-£2 billion in 2025.
“We project this will predominantly be spurred by the continued improvement in the civil aerospace sector, where rising engine flying hours are resulting in growing long-term service agreement (LTSA) receipts. After accounting for the portion payable to risk and revenue-sharing partners, Rolls-Royce recorded £500 million of LTSA inflows in the first half of 2023. We expect this to reach, or slightly exceed, £1 billion for the year,” S&P said in a press release.
The outlook is positive.
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