Fitch Upgrades Raytheon's Ratings to 'BBB+'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has upgraded Raytheon Company's (RTN RTN Return RTN Raytheon Company (stock symbol) RTN Research Training Network RTN Rotarian RTN Routing Transit Number RTN Recursive Transition Network RTN Register Transfer Notation RTN Radial Tangential Normal ) Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) and long-term ratings as follows: -- IDR to 'BBB+' from 'BBB'; -- Senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. to 'BBB+' from 'BBB'; -- Bank facilities to 'BBB+' from 'BBB'. In addition, Fitch affirms RTN's following rating: -- Commercial paper programs 'F2'. The Rating Outlook is Stable. Approximately $4.0 billion of debt is affected by these actions. The upgrades are based on RTN's recent announcement that it will sell Raytheon Aircraft (RAC See remote access concentrator. ) to two private equity firms for $3.3 billion and use some of the proceeds to retire debt. The upgrades are also based on the continuing solid performance in RTN's government and defense businesses and strong cash generation in 2006. Fitch could take further positive rating actions in the next year depending on RTN's financial strategy, cash deployment, and operating performance. Fitch believes that the RAC transaction and the related debt retirement will materially strengthen RTN's financial profile. RTN expects the transaction will generate $2.5 billion of cash after taxes, fees, and the funding of RAC's pension plan. Subject to the completion of the transaction (expected in the first half of 2007), RTN's board of directors has authorized the early retirement of approximately $1.0 billion of debt and $750 million of share repurchases. The early retirement of debt will be in addition to $685 million of debt maturing in 2007. Fitch estimates that RTN's debt will decline by more than 40% as a result of the early debt retirement and debt maturities in 2007, and RTN should continue to have substantial liquidity after these cash deployment actions. Fitch believes that there is a high degree of certainty that the transaction will be completed. RTN's ratings reflect the competitive position of the company's defense businesses, high levels of U.S. defense spending, large backlog, and liquidity position. Concerns center on program risks within the DOD (1) (Dial On Demand) A feature that allows a device to automatically dial a telephone number. For example, an ISDN router with dial on demand will automatically dial up the ISP when it senses IP traffic destined for the Internet. budget, some shareholder-focused elements of the company's cash deployment plan, the sizable pension deficit, and losses at Flight Options. At Sept. 24, 2006, RTN had a liquidity position of $2.7 billion, consisting of $1.2 billion of cash and $2.1 billion credit facility availability, offset by $582 million in short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. and current maturities. RTN retired $408 million of maturing debt in May. RTN's debt-to-EBITDA ratio for the last 12 months ending Sept. 24, 2006, was 1.6 times (x) compared to 2.1x in 2005 and 2.8x in 2004. Adjusted for non-cash pension expense these ratios were 1.4x, 1.7x, and 2.2x. EBITDA-to-Interest coverage improved to 8.8x for the last 12 month period compared with 6.8x in 2005 and 4.4x in 2004. High defense spending levels continue to support RTN's ratings and RTN's government and defense operations, which currently account for more than three-quarters of the company's revenues and will account for nearly all of RTN's revenues after the RAC sale. RTN's government and defense revenues grew 6.3% in 2005 and should grow at least at mid-single digit rates in 2006. Government and defense margins rose 70 bps to 11.8% in 2005 and 50 bps to 12.0% in the first three quarters of 2006. Government and defense bookings continue to be strong, exceeding government and defense revenues in both 2005 and the first nine months of 2006. RTN's pension plans were underfunded un·der·fund tr.v. un·der·fund·ed, un·der·fund·ing, un·der·funds To provide insufficient funding for. underfunded adj → infradotado (económicamente) by $3.9 billion at the end of 2005. Required contributions total several hundred million dollars annually, and these payments could rise as a result of legislation. The credit impact of the pension deficit is mitigated by RTN's strong cash flow and the company's ability to include some pension costs in the pricing for defense contracts. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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