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Investing.com -- Moody’s Ratings has revised the outlook for Tutor Perini (NYSE:TPC) Corporation to positive from stable and affirmed the B3 corporate family rating (CFR). The company’s B3-PD probability of default rating (PDR), Ba3 rating of the senior secured first lien revolving credit facility, and Caa1 rating of its senior unsecured notes were also affirmed. The rating on the senior secured first lien term loan B was withdrawn following its full repayment in February 2025. Tutor Perini’s speculative grade liquidity rating (SGL) remains at SGL-2.
The change in outlook is attributed to Tutor Perini’s significant deleveraging after the full repayment of the term loan B in 2024 and early 2025, a record $18.7 billion backlog at the end of FY2024, strong free cash flow generation over the past three years, and expectations of positive EBITDA in the next 12-18 months. The affirmation of the ratings reflects potential challenges in accurately forecasting near-term earnings and credit metrics due to ongoing settlement and litigation activity.
Tutor Perini’s market position, scale, diversity, and limited competition in US nonresidential building and civil construction markets support its B3 CFR. However, its rating is constrained by weak credit metrics, thin margins, inconsistent free cash flow generation, high unbilled receivables, and significant exposure to risk related to fixed-price and guaranteed maximum price construction contracts.
Despite adverse legal judgements, settlements, and other project charges that resulted in negative Moody’s-adjusted EBITDA in FY2024, Tutor Perini produced over $500 million in operating cash flow and $445 million in Moody’s-adjusted free cash flow. The company used most of this cash flow to pay off its term loan B, reducing its gross debt by $477 million since FY2023. Moody’s estimates that Tutor Perini will generate $160-180 million in Moody’s-adjusted EBITDA in 2025 and its leverage will improve from negative to 2.6-2.9x.
Tutor Perini’s SGL-2 rating indicates good liquidity. At the end of 2024, the company had $455 million in cash, with $266 million readily available for general corporate purposes. The company repaid the remaining term loan B balance of $122 million in January and February 2025. Tutor Perini has a $170 million revolving credit facility maturing in August 2027 that was undrawn and fully available at year-end 2024.
The positive outlook reflects expectations for a significant improvement in EBITDA and credit metrics in the next 12-18 months due to significant debt repayment and execution on its high-margin backlog. The ratings could be upgraded if charges decrease, leverage is sustained below 5.5x, interest coverage is sustained above 2.0x, FFO/Debt is sustained above 15% and the company maintains its high backlog and consistently generates free cash flow. Conversely, the ratings could be downgraded if the company continues to incur significant charges, fails to generate positive free cash flow consistently, or if liquidity materially weakens.
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