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Investing.com -- Fitch Ratings has upgraded Carpenter Technology Corporation’s Long-Term Issuer Default Rating (IDR) to ’BBB-’ from ’BB+’ with a Stable Outlook, moving the specialty metals producer into investment grade territory.
The rating agency also upgraded Carpenter’s senior unsecured debt to ’BBB-’ from ’BB+’ and rated the company’s proposed senior unsecured notes ’BBB-’. The secured revolving credit facility was affirmed at ’BBB-’ and will rank equally with other senior unsecured securities following a proposed amendment to release security.
Proceeds from the proposed notes will be used to repay senior unsecured notes due in 2028 and 2030.
The upgrade reflects Fitch’s expectation that Carpenter will maintain EBITDA leverage below 2.0x and EBITDA margins above 18%. For the last twelve months ending September 30, 2025, the company’s EBITDA leverage stood at 1.0x.
Carpenter’s strong position in the aerospace and defense sector, which accounted for 51%-62% of sales over the last three fiscal years, supports its business model. The company has signed several long-term sales agreements with aerospace customers that include significant price increases.
Fitch views Carpenter’s focus on specialty alloy products for critical applications as providing significant barriers to entry, allowing its products to command premium pricing. The company achieved a 24% EBITDA margin in fiscal year 2025.
Carpenter is proceeding with a $400 million brownfield expansion project that includes a vacuum induction melting furnace, remelt capacity, and finishing assets for high-value applications. The project is expected to begin production in fiscal year 2028, with funding coming from operational cash flow.
The rating agency believes Carpenter has effectively mitigated exposure to volatile metal prices through surcharges, allowing the company to pass through most raw material price fluctuations with some lag.
For a potential upgrade, Fitch would look for increased size, scale or diversification, EBITDA margins sustained above 23%, and EBITDA leverage maintained below 2.0x on a sustained basis.
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