S&P cuts Rolls-Royce credit rating to junk on COVID-19 hit

FILE PHOTO: A Rolls Royce jet engine is seen on Boeing 787-10 on the static display during the 52nd Paris Air Show at Le Bourget Airport near Paris, France June 20, 2017. REUTERS/Pascal Rossignol

LONDON (Reuters) - Ratings agency Standard & Poor's cut engine maker Rolls-Royce's RR.L credit rating to junk on Thursday, citing the disruption caused to global air travel from the COVID-19 pandemic.

S&P cut its rating for the British company to “BB” from “BBB-“, below investment-grade.

“Actions to contain the pandemic, including government-imposed social-distancing measures, travel restrictions, and stay-at-home orders, have suddenly and sharply reduced global demand for air travel,” S&P said in a statement.

In response, Rolls-Royce said it had taken swift action to boost its liquidity and cut costs to deal with the short-term impact of the health crisis.

“While it is disappointing to lose our investment grade rating with S&P, none of our borrowing facilities contain covenants or credit rating triggers that demand early repayment nor do any of our contracts with airlines,” the company said in a statement.

Reporting by Andy Bruce; editing by William James