Moody's lifts GenCorp to SGL-2

Moody's Investors Service said it raised the speculative grade liquidity rating of GenCorp, Inc. to SGL-2 from SGL-3 and affirmed its corporate family rating at B1, probability of default rating at B1-PD, subordinated convertible bonds at B3 (LGD6) and senior secured regular bonds at Ba3 (LGD3). The outlook remains negative.

The agency said the SGL-2 rating reflects a good, rather than adequate, liquidity profile as GenCorp's cash balance will likely remain above $200 million over the near term, covenant headroom should remain good and the RD Amross acquisition seems unlikely to proceed (and thereby consume cash) before the deal's June expiration date. In addition, GenCorp's alternate liquidity sources improved with the announced $57 million sale of 703 entitled acres, which is expected to generate $41 million of cash proceeds at closing.

The negative outlook nonetheless continues because organic revenues have declined in the past year, debts have risen since the (June 2013) Rocketdyne acquisition and competition is rising within the space launch business, Moody’s said.

The B1 corporate family rating benefits from backlog growth since the 2013 fiscal year, good liquidity and the expectation that GenCorp will deploy its free cash flow for debt reduction rather than stock repurchases in the near term, the agency said.

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