Moody’s Lowers Fluor’s Senior Debt, Paper Rating

Claiming that Fluor Corp. has failed to demonstrate a “significant move toward profitability,” Moody’s Investors Service said Thursday that it has lowered the Irvine engineering and construction company’s senior debt and commercial paper ratings.

The New York credit rating service lowered Fluor’s senior long-term debt rating from BAA-2 to BAA-3, and the company’s commercial paper rating was lowered from Prime-2 to Prime-3. About $120 million of Fluor’s $252 million debt is affected.

While the downgrading won’t change the amount that Fluor pays on that debt, it could raise the interest it has to pay on future borrowings.

While Moody’s acknowledged Fluor’s improved performance in the construction sector, it noted that its mining operations “have not shown any meaningful rebound, even though the economy began to recover several years ago.” Consequently, “pressure on earnings and cash flow is likely to continue, at least through the intermediate term, adversely affecting debt protection measurements,” Moody’s said.

David Tappan, Fluor’s chairman, said through a spokesman that “while Moody’s still regards Fluor’s debt as investment grade, we are disappointed that they chose to reduce the rating. We feel we have made significant progress in turning the operation around as indicated by our recent first-half earnings statement.”

As previously reported, Fluor lost $5 million during the first half of its fiscal 1986, contrasted with a loss of $72 million a year earlier. Revenues during the six months ended April 30 grew 30% to $2.6 billion from $2 billion in 1985.