Fitch: BAE Systems bond BBB+

Fitch Ratings said it assigned an expected rating of BBB+ to BAE Systems Holdings Inc.’s proposed bond issuance of up to $1.5 billion with varying maturities.

The proposed bond will be fully guaranteed by BAE Systems plc, the ultimate parent entity, the agency said.

The proceeds of the notes will be used to pre-finance the group’s existing debt, primarily a $1 billion bond maturing in 2019, Fitch said, and for general corporate purposes.

The expected rating is in line with BAE’s BBB+ long-term issuer default rating as the notes constitute direct, unsecured and unconditional obligations of the issuer, the agency said.

The notes will rank equally among themselves and with all other present or future unsecured and unsubordinated obligations of the issuer, the agency added.

The final rating on the notes is contingent upon the receipt of final documentation conforming to information already received.

The negative outlook reflects a weakening of the certain financial ratios for the company in recent years, such as its free cash flow margin and gross leverage, Fitch said.

The agency said these metrics may improve in the short term, but if they remain at present levels the company’s overall credit profile may no longer be commensurate with a BBB+ rating.

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