Finmeccanica SpA (FNC)’s debt rating was cut to junk by Standard & Poor’s on concern the Italian aerospace and defense company won’t be able to sufficiently improve capital levels through asset sales.
“We no longer believe Finmeccanica’s credit metrics will improve markedly in 2013, even if some possible disposals are forthcoming,” S&P said in a statement today. The Rome-based company’s rating was cut to BB+ from BBB-, S&P said.
Chief Executive Officer Giuseppe Orsi is targeting 1 billion euros ($1.33 billion) of disposals in areas such as energy and rail to cut debt of 4.8 billion euros. The company said Nov. 8 it expected to secure binding offers for the assets, including a majority stake in its Ansaldo Energia power-plant construction unit, by the end of last year.
“The previous rating was underpinned by our expectation that Finmeccanica would be able to improve its credit metrics through disposal proceeds,” S&P said.
Finmeccanica said in a statement after the downgrade that it remains “committed to further deliver on its restructuring program and to timely execute its disposal plan.” The company last month sold a share of Italian aircraft engine maker Avio as part of General Electric Co. (GE:US)’s $4.3 billion purchase from majority owner Cinven Ltd. Proceeds from Avio were “insufficient to achieve a marked improvement in its financial risk profile,” S&P said.
Finmeccanica is seeking binding bids for Ansaldo Energia by Jan. 23 while a final decision will be made at a later board meeting, Ansa reported Jan. 16. S&P said that the deal could generate proceeds of 400 million euros to 500 million euros for Finmeccanica. However, “it would still leave the company’s financial risk profile in the ‘significant’ category” and not trigger a ratings upgrade.
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