Moody's upgrades GenCorp

Moody's Investors Service said it upgraded GenCorp, Inc.'s corporate family rating to B2 from B3, probability-of-default rating to B2 from Caa1, senior secured credit facilities to Ba2 (LGD1, 5%) from Ba3 (LGD1, 5%) and convertible subordinated notes to Caa1 (LGD5, 81%) from Caa2 (LGD4, 60%) and confirmed its senior subordinated notes at B1 with a revised loss-given-default assessment of LGD3, 35% (formerly LGD2, 18%).

This completes the review for possible upgrade initiated in December, and the outlook is stable.

The agency said the upgrade follows two recently completed financial transactions that strengthening the company's capital structure and near-term liquidity profile. The first was the successful placement of $200 million of 4.0625% convertible subordinated notes due 2039, with a majority of the proceeds used to meet the January 2010 put of a $125 million 4% convertible subordinated note issue, and the second is the March 17 amendment to the secured credit agreement that, among other things, allows the company to incur additional senior unsecured or subordinated debt as well as to repurchase or refinance its outstanding convertibles and 9½% subordinated notes.

The ratings are supported by subsidiary Aerojet-General's long-term historic position as a key niche supplier of solid and liquid rocket propulsion systems for defense and space applications despite its relatively small scale, Moody's said.

The ratings are constrained by the possible November 2011 put of the 2.25% convertibles, the ongoing legacy burden of the substantial environmental liability and the now significant amount of unfunded non-current pension liability, Moody's said.

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