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Fitch downgrades BAE Systems, debt to BBB
Fitch Ratings said it downgraded BAE Systems plc's long-term issuer default rating and senior unsecured rating to BBB from BBB+ and affirmed the short-term issuer default rating at F2.
The outlook on the long-term issuer default rating is stable.
At the same time, the agency downgraded BAE Systems Holdings Inc.'s notes' senior unsecured rating to BBB from BBB+ and affirmed its commercial paper program's short-term rating at F2.
Fitch said the downgrades reflect a weakening of certain financial ratios, specifically the funds from operations and free cash flow margins as well as gross leverage. This weakening has taken place over past several years as the business has generated relative low underlying profitability and exhibited shareholder friendly policies (as evidenced by a five-year cumulative pre-dividend free cash flow of £2.5 billion relative to shareholder remuneration in excess of £4.2 billion). This leaves the near-term profile more commensurate with a BBB rating.
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