(Alliance News) - Standard & Poor's on Thursday downgraded Rolls-Royce Holdings PLC's credit rating to junk status.
Shares in the FTSE 100-listed jet engine maker were down 9.4% at 288.90 pence in London on Friday.
S&P commented that the Covid-19 pandemic is continuing to "severely disrupt" global air travel, with most airlines grounding their fleets.
Rolls-Royce's civil aerospace division will be materially affected by lower wide-body and business jet engine sales and lower engine flying hour related receipts from airlines in 2020 and 2021.
"Its group profitability, cash flow, and credit metrics will be negatively affected," said S&P.
The ratings agency expects Rolls-Royce to materially underperform against its previous base case, and thus lowered its long- and short-term issue credit ratings to BB/B from BBB-/A-3. The outlook is negative.
"The negative outlook reflects our view that the pandemic will continue to cause disruption and uncertainty around future business prospects to airlines, aerospace companies, and their supply chains, including Rolls-Royce. It also reflects the risk that Rolls-Royce could post higher one-off charges in the next 12 months than we currently expect in our base case, which could further affect the group's profitability and credit metrics," said S&P.
By Lucy Heming; lucyheming@alliancenews.com
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Rolls-Royce (RR.)
