S&P Upgrade Invensys to 'BBB-'
Posted 24 July 2009The text below is a press release issued by S&P
LONDON (Standard & Poor's) July 24, 2009--Standard & Poor's Ratings Services said today that it raised its long-term corporate credit rating on U.K.- based engineering company Invensys PLC to 'BBB-' from 'BB+'. The outlook is stable.
At the same time, the senior unsecured debt rating on the company's £400 million credit facility was raised to 'BBB-' from 'BB+'; the recovery rating of '3' on this debt was withdrawn.
"The upgrade reflects our view of reduced financial risk at Invensys and assumes that the company will be able to maintain credit metrics at levels that we view as commensurate with the 'BBB-' rating," said Standard & Poor's credit analyst Andres Albricci. "It also reflects our assumption that Invensys will be able to continue to generate positive free operating cash flow. We anticipate that Invensys will be able to achieve relatively stable performance in spite of the economic downturn, mainly supported by the increasing weight of its Rail operations."
The upgrade also assumes that Invensys will maintain a conservative financial policy, including only limited debt-funded acquisitions and modest dividends.
Invensys' financial risk profile has improved considerably in recent years. It is underpinned by adequate liquidity, a lack of significant debt, a moderate financial policy, and our anticipation of adequate cash flow generation.
Total revenues in financial 2009 increased by 8.3% to £2.284 million thanks to favorable exchange rates. However, profitability deteriorated despite the positive currency effect, mainly because of declining margins in the company's Process Systems, Eurotherm, and Controls divisions.
In our view, Invensys will be able to maintain credit metrics commensurate with the 'BBB-' rating. In particular, we anticipate that the company will be able to maintain an FFO-to-debt ratio of more than 35%. We also anticipate that the company will continue to generate positive FOCF and maintain a conservative financial policy, including only limited debt-funded acquisitions and modest dividends.
We could revise the outlook to negative if we believe that the company will not be able to achieve credit metrics in line with our forecasts or that FOCF generation will turn negative. The combination of major shareholder distributions, large debt-funded acquisitions, and weak operating performance could also trigger a negative rating action.
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Publication date: |
24-Jul-2009 |
Primary Credit Analyst: |
Andres Albricci, London (44) 20-7176-7224; |
Secondary Credit Analyst: |
Andreas Zsiga, Stockholm (46) 8-440-5936; |
