James Bond-carmaker Aston Martin's liquidity rating falls to less than adequate

James Bond-carmaker Aston Martin's liquidity rating has been revised down to less than adequate by S&P Global Ratings, which also affirms its 'B-' corporate-credit rating and stable outlook.

S&P Global also confirmed Aston Martin's 'B-' senior-secured debt rating, and its 'CCC' subordinated-debt rating.

The ratings outfit further expected the carmaker -- whose silver-screen links with 007 date back to the 1960s -- would have sufficient liquidity to fund negative free operating cash flow (FOCF), despite its view that liquidity headroom would be reduced over the next year.

"The affirmation reflects our expectation that Aston Martin will soon begin to see the benefits from its substantial multi-year investments in replacing and updating its range of luxury sports cars, with the first new car -- the DB11 -- due to be rolled-out in September 2016," said S&P Global.

"This is supported by a growing order book and a positive reception in the trade press. In our base-case scenario, we expect Aston Martin's operating performance to strengthen in 2016 and 2017, with higher volumes, revenues, and reported EBITDA," it added in a statement.

"This new car and others which follow will also strengthen Aston Martin's competitive position and help provide stronger cash flows to fund future investments."

The DB11 supercar was unveiled earlier this year and was a follow-up to the limited-edition DB10 driven by actor Daniel Craig in the Bond-film Spectre. Its 5.2-litre twin-turbocharged V12 engine could hit 62 miles an hour in 3.9 seconds.

S&P Global further noted Aston Martin's liquidity was replenished by shareholders who issued preference shares of £100m in April 2015 and a further £100m in April 2016.

"However, Aston Martin continues to invest heavily in research and development (R&D) and capital expenditures in executing its strategy."

Based on management guidance, S&P Global said capitalised research and development and capex could be in the region of £180m-£190m during 2016, after spending £163m in 2015.

"Despite less liquidity headroom, we expect the company to have enough funding to meet this level of spending, but this depends on the timely and successful DB11 product launch."

Liquidity was also supported by retained cash of £37m, and the lack of major debt repayments in 2016 and 2017. S&P Global noted substantial debt maturities in July 2018, which over the next year posed a growing and material refinancing risk.