Moody’s upgrades Kratos, debt

Moody's Investors Service said it upgraded Kratos Defense & Security Solutions, Inc.’s corporate family and senior secured ratings to B3 from Caa1 and the speculative grade liquidity rating to SGL-2 from SGL-3.

The outlook is stable.

The upgrade reflects $186 million equity issuance proceeds received in early September, cash that Kratos can use to reduce debt and boost liquidity.

Moody’s said the B3 corporate family rating reflects expectations of an improved but still high level of financial leverage, with weak profitability and modest near-term free cash flow.

“With the proceeds of the primary equity offering, Kratos does have improved liquidity. Moody's also considers the potential for significant upside profits from Kratos' unmanned aerial system investments and development contracts. The investments cover both aerial target drones and, the more emerging, unmanned aerial tactical vehicle category,” the agency said in a news release.

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