Moody's rates MTU Aero Engines

Moody's Investors Service said it assigned a prospective Ba3 senior implied rating to MTU Aero Engines Investment GmbH & Co. KG, which will be the indirect owner of MTU Aero Engines GmbH.

New ratings assigned are as follows: senior implied rating at MTU Aero Engines Investment GmbH & Co. KG at prospective Ba3; proposed €240 million of senior notes due 2014 at MTU Aero Engines Investment GmbH & Co. KG at prospective B2; €620 million of senior secured credit facilities at Blade Dritte Beteiligungs GmbH & Co. KG (to be renamed MTU Aero Engines Dritte Beteiligungs GmbH & Co. KG) at prospective Ba3; unsecured issuer rating at MTU Aero Engines Investment GmbH & Co. KG at prospective B3.

The outlook is stable.

The senior implied rating reflects the company's leadership position as a global supplier of aero engines, sub-systems and components; MTU's long-term customer relationships (including its strategic alliance with Pratt & Whitney); MTU's position as the main provider of military engines and maintenance, repair and overhaul services to the German air force; the high market barriers to entry that exist in the aeronautical industry; the company's diverse engine portfolio and the long-term revenue visibility derived from these engine programs; and Moody's expectation that MTU should maintain adequate liquidity (despite the potential for large working capital swings).

However, the rating also reflects the company's high financial leverage; the company's exposure to fluctuations in the US$/euro; its significant exposure to the commercial airline sector; strong competition in both MTU's direct and end customer markets; the potential for revenue programs to be subject to material delays or cancelations due to both technical and financial reasons; and execution risk associated with the ongoing restructuring programs.

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