Standard & Poor's rating agency said it has affirmed its ratings on $4.4 billion in debt issues at McDonnell Douglas Corp. and its finance subsidiaries.
S&P said the rating outlook is "negative" for McDonnell Douglas, and that additional program problems or write-offs could lead to a downgrade. But it said improving operations will gradually strengthen earnings, cash flow and capital structure.The agency said it had affirmed the triple-B senior debt and A-3 commercial paper ratings for McDonnell Douglas, covering $2.8 billion in debt. It also affirmed triple-B senior debt ratings for its finance units, along with a triple-B-minus subordinated debt rating and an A-3 commercial paper rating for McDonnell Douglas Financial Services Corp.
"McDonnell Douglas's commercial aircraft operations have a weak competitive position, and market share continues to fall as industry demand remains soft," the rating agency said.
S&P said that the ratings are based on a "low likelihood" of a sale of up to 40 percent of McDonnell Douglas's commercial aircraft segment for up to $2 billion to Taiwan Aerospace Corp. The deal, expected to fund development of the MD-12 jumbo jet, was originally expected to go through early this year, but has been delayed because of political problems in Taiwan and a lack of orders for the plane.
S&P said problem defense contracts are coming under control and cash flow generation is expected from maturing programs. It said several major military and space programs are well positioned and should be bolstered by foreign sales despite recent doubts that the proposed sale of $5 billion of F-15 fighters to Saudi Arabia will be backed by the Bush administration.