Triumph Group Inc. Outlook Revised To Negative From Stable, Ratings Affirmed On Possible Coronavirus Impact

  • The significant decline in air travel because of the coronavirus pandemic could reduce demand for Triumph Group Inc.'s aircraft structures, components, and aftermarket services, putting pressure on earnings and cash flow in fiscal 2021.
  • Therefore, we are affirming our ratings on Triumph, including the 'B-' issuer credit rating, and revising the outlook to negative from stable.
  • The negative outlook reflects that earnings and cash flow could be materially worse than we expect because of impact from the coronavirus on demand or the company's operations.
WASHINGTON D.C. (S&P Global Ratings) March 26, 2020—S&P Global Ratings today took the rating actions above.
The impact of the coronavirus pandemic on global air travel will likely reduce demand for Triumph's products and services, pressuring earnings and cash flow.   Airlines are cutting capacity because of the significant decline in air travel, which will likely reduce demand for the company's aftermarket parts and services. They are also likely to defer or cancel orders, which could cause Boeing Co. and Airbus SE to reduce jetliner production and decrease orders for Triumph's aircraft structures and components. Demand for business jets is also likely to be lower, but we do not expect sales for military programs to be affected. Triumph's operations could also be disrupted by government restrictions on travel or employee illness.
The negative outlook reflects that earnings and cash flow could be materially worse than we expect because of impact of the coronavirus pandemic on demand or the company's operations.
We could lower the rating if the impact of the coronavirus pandemic on earnings and cash flow materially deteriorates liquidity. We could also lower the rating if these factors or other operational problems increase leverage such that we believe the company's capital structure has become unsustainable.
We could revise the outlook stable if we believe debt to EBITDA will remain below 7.5x, cash flow will not be materially worse than our current expectations of a use of $60 million-$70 million, and liquidity remains adequate. This could occur if the impact on the company's sales from the coronavirus are not severe, production is not interrupted for an extended period, and efforts to reduce costs moderate the effect on earnings and cash flow.
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