S&P raises Rolls Royce long-term debt rating to BB with 'positive' outlook

The latter meant that the engineer's debt might return to so-called investment grade over the next 12-18 months, the ratings credit agency said.

Rolls Royce's long-term rating was upgraded by one notch to BB with S&P citing its "strong operating and financial performance in 2022."

"The group improved its profitability, applied disposal proceeds to reduce debt, and its free operating cash flow (FOCF) turned materially positive," it added.

S&P also forecast that the company's adjusted funds from operations as a proportion of debt would top 40% in 2023, against 33.5% in 2022, while gearing would decline below two times operating profits.

"The positive outlook reflects that we could raise the ratings in the next 12-18 months if we see a positive track record of strong and sustainable [Free Operating Cash Flow] generation comfortably in excess of £600m, with [Funds From Operations] to debt sustainably above 45%."