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Rolls-Royce along with its senior unsecured debt have been upgraded by a notch to IG-status of BBB- by S&P. The upgrade follows its strong operating performance in FY2023 leading to meaningful deleveraging. In FY2023, Rolls-Royce sales increased by 21.9% YoY to £16.5bn and its adjusted debt to EBITDA dropped to 0.9x from 2.2x a year ago due to higher free cash flow from operations. S&P expects Rolls-Royce’s EBITDA margins to improve and its balance sheet to strengthen further in FY2024 and FY2025 and hence has a positive outlook on the entity. Previously, the company was upgraded to BB+ level by both S&P and Fitch in December.
Its 5.75% 2027s traded flat at 100.3 cents on the dollar, yielding 5.64%.