The world may be clinging on by its fingernails for fear of falling into the euro crisis-Great Depression chasm, but there is still some encouraging news this week on the financial front in aerospace.
Senior, the UK-based components and systems manufacturer, has lined up a new five-year £60m revolving credit facility maturing in October 2016, with an additional uncommitted £20m accordion facility. This replaced an existing, currently undrawn, £80m revolving credit facility that was due to expire in July 2012, and gives Senior total committed borrowing facilities of £191m, with a weighted average maturity of 5.3 years - that's 1.7 years farther off than before, so the next material refinancing is now not due until October 2014.
Senior's appeal to lenders (in this case Lloyds TSB, HSBC, KBC and the London branch of Crédit Industriel et Commercial) is clear to see. As of end-June, net debt stood at just £63m and net cash was £53m, for a company that made £52 million before taxes on 2010 sales of £567. During 2010, gearing came down to 28%, from 55% at the end of 2009.
Moreover, Senior has a well-balanced portfolio of programme exposure, including more than $800,000 per shipset on the Boeing 787, which could translate into $100 milllion annually for Senior when aircraft production finally reaches planned levels. Other key programmes in the Senior mix are the buoyant Airbus A320 and Boeing 737 and, on the military side, Lockheed Martin F-35 and C-130, and Sikorsky Blackhawk.
As chief executive Mark Rollins puts it: "Given the ongoing uncertainty in the financial markets, it is pleasing to report that the new facility secures the group's funding requirements for the foreseeable future."
But perhaps better news comes from BAE Systems. Heavily exposed to defence and, not surprisingly, forced to slash 3,000 UK jobs last month in response to flagging demand for Eurofighter Typhoon and F-35 as well as long-term programmes like its Hawk trainers and Tornado attack aircraft, BAE looks vulnerable at home and in the US, where it has invested heavily.
But, ratings agency Moody's has assigned Baa2 ratings with a stable outlook to $1.25 billion of senior unsecured notes due in 2016-2041, the net proceeds of which BAE plans to use to service near-term debt maturities and boost liquidity.
As Moody's explains, the rating reflects the company's large size and scale as well as improved programme management and efficiency in manufacturing: "Operations should be fairly steady, notwithstandingnear-universal budgetary pressures with respect to defense spending and heightened competition, as the substantial backlog (approaching 2.5x revenue) moves into the more profitable production phase."
The outlook for Typhoon and F-35 is clearly mixed but, notes Moody's: "The US-focused defense electronics group could become a larger contributor to BAE's profits as electronics and cyber security services becomes a bigger priority in US defense and security budgets."
So, while markets wane and wobble and politicians thrash about on both sides of the Atlantic, at least the near-term financing prospects for sound aerospace companies look secure.