Moody's may cut Finmeccanica, up DRS

Moody's Investors Service said it placed the A3 senior unsecured debt rating of Finmeccanica SpA under review for downgrade and placed the B1 corporate family rating of DRS Technologies. Inc. under review for upgrade.

The actions follow Finmeccanica's agreement to purchase DRS for $5.2 billion including debt assumption equal to about 12 times EBITDA for the 12 months ending Dec. 31.

"This proposed transaction is consistent with Finmeccanica's plan to grow by acquisitions which are likely to be sizable (around the €3 billion level), with the U.S. defense market being particularly attractive," Bob Jankowitz, senior vice president at Moody's, said in a written statement.

"The rating outcome depends critically on the amount of incremental debt used to fund the transaction, and Moody's review will focus on Finmeccanica's target capital structure and the timing in achieving that profile," Jankowitz said.

Finmeccanica has a debt-to-EBITDA ratio of 3 times.

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