Moog Inc.'s credit rating was upgraded Monday by Standard & Poors' Corp., leaving the Elma aerospace firm's just one notch below a coveted investment grade rating.
S&P upgraded Moog's corporate credit rating to BB from its old rating of BB, with a stable outlook. The improved rating, which indicates that Moog is a less risky borrower, could help the company reduce its borrowing costs.
S&P said Moog's rising sales and profits during the fiscal year that ended in September helped generate a cash flow that was strong enough to provide above-average interest coverage.
The ratings agency said it expects further improvement this year as demand for Moog's servovalves remains solid in its key markets and the company improves the efficiency of its operations, while paying off some of its debt.
S&P said that the company's financial situation could handle a mid-sized acquisition in the $300 million range that was financed with debt without jeopardizing its upgraded credit rating, as long as any increase in leverage is only temporary. A lasting increase in Moog's financial leverage could lead to a revision to a negative outlook, S&P said.