DBRS Confirms Textron Inc., Textron Financial and Textron Canada at A (low)

DBRS has today confirmed Textron Inc.’s (Textron or the Company), Textron Financial Corporation’s (Textron Finance) and Textron Financial Canada Funding Corp.’s (Textron Canada) ratings at A (low) for Senior Debt and R-1 (low) for Commercial Paper. The trends are Stable.

The ratings are expected to remain on course, underpinned by Textron’s market leadership in aerospace, defence and other manufacturing areas, robust financial ratios and favourable macro trends. In addition, DBRS notes that the ratings remain constrained by the Company’s cyclical business characteristics, despite currently good operating results.

The Company’s recent EBITDA growth continued to be driven primarily by strong global demand for business jets. This is due to solid global economic conditions, where international customers are playing a more meaningful role and could bolster sustainability of demand going forward. Other positive factors include structural industry changes where customers have greater interest in efficiency, privacy and safety in travel.

Textron’s other major segments (Bell and Industrial), while generating mixed EBITDA results in recent years, have nonetheless been solid. In addition, these segments as well as the Cessna segment, continued to develop leading edge technology and manufacture innovative products -- cornerstones of the Company. One example is the Armed Reconnaissance Helicopter (ARH), which could potentially play a key role in overseas conflicts. The caveat is that military contracts, such as the ARH, carry some financial and volume uncertainty because the government can rescind contracts. U.S. government influence is notable, currently accounting for 19% of Textron’s total revenue.

For the recent 12 months to March 31, 2007, Textron generated $1,163 million in operating profits and reached a strong debt-to-EBITDA of 1.45. Textron Finance continued to be a material contributor to the Company’s earnings. The Company’s margins continued to benefit from pricing strength, a strategy to divest underperforming assets or those that don’t fit Textron’s long-term strategic objectives, and creating more common processes across the enterprise.

As a result, DBRS believes that the Company’s solid financial position enables it to manage operational volatility and invest for future growth.

Note:
All figures are in U.S. dollars unless otherwise noted.