Fitch upgrades Rolls-Royce & Partners Finance to ’BBB’ with positive outlook

Investing.com -- Fitch Ratings has upgraded the Long-Term Issuer Default Rating (IDR) of Rolls-Royce (OTC:RYCEY) & Partners Finance Limited (RRPF) to ’BBB’ from ’BBB-’, with a positive outlook on Thursday, March 13, 2025. The upgrade is driven by the improved Shareholder Support Rating (SSR), which has been raised to ’bbb’ from ’bb+’, following the upgrade of RRPF’s 50% owner, Rolls-Royce plc (RR; BBB+/Positive), to ’BBB+’ from ’BBB-’.

Fitch’s upgrade is based on its expectation of support for RRPF from Rolls-Royce, which owns half of RRPF. The agency views RRPF as a strategically important subsidiary of the group, but not a core one. The positive outlook for RRPF mirrors that of Rolls-Royce’s Long-Term IDR.

Fitch’s assessment of Rolls-Royce’s propensity to support RRPF takes into account RRPF’s integration into Rolls-Royce in terms of operations, staffing, and funding. RRPF’s important role for Rolls-Royce’s aftermarket product offering, shared branding, default implications, and RRPF’s record of generating sound returns also contribute to this assessment.

The upgrade does not immediately affect RRPF’s standalone credit profile (SCP), which reflects its contained leverage, staggered funding profile, and stable asset utilization rates. These factors should protect its profitability in the event of any slowdown in demand growth.

Fitch has also upgraded the senior secured debt issued by RRPF and RRPF Engine Leasing one notch above RRPF’s ’BBB’ Long-Term IDR, reflecting strong recovery prospects. This is primarily due to the notes’ secured status, which includes mortgages over all of RRPF’s engines.

RRPF’s debt includes a clause that triggers an event of default on all of its debt if a default occurs on Rolls-Royce’s debt. Specifically, if Rolls-Royce’s borrowings above GBP150 million or 2% of Rolls-Royce’s consolidated net worth are subject to acceleration, it would trigger an event of default at RRPF.

Factors that could lead to a negative rating action or downgrade include a revision of Rolls-Royce’s Outlook to Stable, a downgrade of Rolls-Royce’s Long-Term IDR, or a material weakening of Rolls-Royce’s propensity to support RRPF.

On the other hand, factors that could lead to a positive rating action or upgrade include an upgrade of Rolls-Royce, an increase in Rolls-Royce’s equity stake in RRPF to above 75%, or strengthening of RRPF’s own financial metrics.

Fitch’s ESG Relevance Scores indicate that ESG issues have a minimal credit impact on RRPF, due to their nature or the way in which they are being managed by the entity.

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