Weak cash flow and an over-reliance on working capital gains to bolster financial results have led Moody's Investors Service to downgrade Rolls-Royce's long-term credit rating to Baa1 from A3.
This is the long-term senior secured rating for the engine manufacturer and it is attributed to a low free cash flow generation, the expectation that free cash flow in 2019 will include working capital gains that are considered unsustainable, and a prediction that 2020 cash flow may also follow suit.
However, its outlook has been changed from negative to stable. This rating reflects Rolls-Royce's improving performance, expected growth in aftermarket sales, and the long-term stability of its engine programmes, Moody's said.
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