Fitch: BAE Systems to negative

Fitch Ratings said it revised BAE Systems plc’s outlook to negative from stable.

The agency also affirmed the company’s long-term issuer default rating and senior unsecured rating at BBB+ and short-term issuer default rating at F2.

Fitch also said it affirmed the rating on BAE Systems Holdings Inc.’s senior unsecured notes at BBB+ and its commercial-paper program’s short-term rating at F2.

The outlook revision reflects a weakening of certain financial ratios in recent years, such as the company’s free cash flow margin and gross leverage, the agency said.

While Fitch said it believes these metrics may improve in the short term, the overall credit profile of the company may no longer be commensurate with the BBB+ rating if metrics remain at present levels.

The company’s capacity to generate free cash flow and flexibility to reduce debt also has weakened as a result of the business shrinking by about 25% over the past five years, the agency added.

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