Ratings agency Standard & Poor’s (S&P) has downgraded engine maker Rolls-Royce’s credit rating to junk, citing the disruption caused to global air travel from the coronavirus pandemic.
The British company’s rating has been lowered to “BB” from “BBB”, (below investment grade) in response to Rolls-Royce’s worsening near-term prospects as whole fleets of planes remain grounded.
“Actions to contain the pandemic, including government-imposed social-distancing measures, travel restrictions, and stay-at-home orders, have suddenly and sharply reduced global demand for air travel,” said S&P.
Rolls-Royce said it had taken swift action to boost its liquidity and cut costs to deal with the short-term impact of the health crisis. “While it is disappointing to lose our investment grade rating with S&P, none of our borrowing facilities contain covenants or credit rating triggers that demand early repayment nor do any of our contracts with airlines,” the company said.
Last week, the aerospace giant which supplies engines for large commercial aircraft such as the Boeing 787 and the Airbus A350 announced it will cut at least 9,000 jobs from its workforce due to the pandemic. The cut represents a layoff of over 17 percent of the company’s 52,000 workforce.
Rolls-Royce’s stock plunged ten percent, following the news of the credit rating’s cut.
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