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S&P puts defense firms Harris, L3 on CreditWatch Positive due to pending merger

S&P Global Ratings placed the ratings of Harris Corp. and L3 Technologies Inc. on CreditWatch with positive implications after the U.S. defense contractors recently announced an all-stock merger.

The debt watcher said the rating action reflects its expectation that the combination will improve the companies' scale, range of capabilities and competitiveness.

"We believe the combined company will have a better competitive position than either L3 or Harris individually, with good customer and contract diversity," S&P said.

The rating agency expects the CreditWatch status, which affects both companies' BBB- issuer credit ratings, to be resolved when the merger closes.

Separately, Fitch Ratings placed L3's long-term issuer default rating of BBB- on Rating Watch Positive, also due to the pending merger.

The rating action is supported by Fitch's expectation that the combined entity will have a more conservative financial policy compared to L3, according to the rating agency.

Fitch also affirmed Harris' ratings, including its long-term issuer default rating of BBB.

Both S&P and Fitch expect a one-notch upgrade following the merger.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.