Moody's affirms Textron's ratings, ups outlook

(AP) — Moody's Investors Service on Tuesday affirmed the ratings of Textron Inc. and its finance subsidiary Textron Financial Corp., and upgraded the rating outlook.

The conglomerate, parent of Cessna Aircraft Co., Bell Helicopter and other companies that produce items ranging from golf carts to tools to unmanned aircraft systems for the Army, kept its Baa3 rating for its senior unsecured debt. Its short-term rating was kept at Prime-3.

Moody's upgraded the rating outlook to stable from negative, citing improved liquidity at the parent organization and better-than-expected progress in the liquidation of certain assets held by the financial unit.

"We estimate cash on hand will be sufficient to cover the substantial portion of the scheduled debt maturities of Textron and TFC through 2011," Moody's said.

The company faces $3 billion of bank credit facilities maturing in April 2012, so continued progress in liquidation and stability in its manufacturing units is important, said Bob Jankowitz of Moody's.

Bell and Textron Systems are expected to be steady performers in the next few years, supported by continued defense spending, Moody's said. Bell can also count on revenue from helicopter servicing and commercial sales.

Nevertheless, the company has a lot of debt and Cessna, which is historically its largest profit producer, faces challenges even as the economy recovers, Moody's said. Its profit has been hit harder than expected, even during a downturn. It is critical for the unit to improve profit and operating margin to maintain the rating.

The rating could be lowered if Textron's free cash flow falls below $300 million for any 12-month forward period, if Cessna doesn't improve its operating margin, cash on hand falls below $1 billion or enough to at least cover the next two quarters of debt payments. The rating could also be threatened if the financial unit has to book heavy write-downs or if it has difficulty collecting payments.

"A positive rating action is unlikely for some time," Moody's said.

In afternoon trading, Textron shares added 12 cents to $20.76.