re: Ann: Fitch upgrades Downer EDI to BBB out... Gawd! How to...

re: Ann: Fitch upgrades Downer EDI to BBB out... Gawd! How to wrap some good news in ten layers of dullness.


Here 'tis.......

FITCH UPGRADES DOWNER EDI TO 'BBB'; OUTLOOK STABLE

Fitch Ratings-Sydney/Singapore-02 October 2009: Fitch Ratings has today upgraded Downer EDI Limited's (Downer) Long-term foreign currency Issuer Default Rating (IDR) to 'BBB' from 'BBB-'. The Outlook is Stable. At the same time, Fitch has upgraded the rating of all senior unsecured debt
issued or guaranteed by Downer, including debt issued by Downer Group Finance Pty Ltd and Works Finance (NZ) Ltd to 'BBB' from 'BBB-'. The upgrades follow a review of Downer's 30 June 2009 year-end results.
Fitch took into account a number of considerations when upgrading Downer's ratings, including the fact that its financial performance was strong in FY09, led by a 7% increase in sales revenue to AUD5.834bn and a 14% increase in after-tax profit to AUD189m. The company returned to credit
metrics consistent with FY05, including Funds From Operations to Interest Expense cover of 6.4x and Total Adjusted Debt (debt adjusted by capitalising operating lease payments) to EBITDAR of
2.8x.

Also, the structural and contractual issues that led to the booking of contract losses suffered by Downer of FY06: AUD294m; FY07: AUD152m have been satisfactorily dealt with. There has also been a decrease in the level of risk associated with the Reliance Rail contract, following project certification by RailCorp at the end of June which now allows Downer to focus its efforts on assembling and testing the prototype, and on delivery of the train sets commencing Q410. Fitch notes that while it is unlikely Downer will reduce the estimated five-month delay on delivery of the first train set, it believes that Downer will be successful in accelerating the delivery process and that the impact of any liquidated damages will not be material. Fitch has also taken into consideration Downer's robust business model with its substantial long-term, relatively low-risk annuity-type revenue streams, a record order book and sound liquidity with committed undrawn credit lines of AUD458m as at 30 June 2009.

The Outlook is Stable. Positive ratings guidelines include Adjusted Debt to EBITDAR falling below 2x, consistent positive free cash flow and successful delivery of the Reliance Rail train sets. Negative rating guidelines would be occasioned by major contract losses and a fall in Funds from Operations to Interest Cover to below four to five times. Downer is a major Australia-New Zealand-based engineering and infrastructure services company,
providing services to the power, rail, road, telecommunications, mining and mineral processing sectors predominantly in the Asia- Pacific region.

Contacts: Maurice O'Connell, Sydney, +61 2 8256 0379; Vicky Melbourne, Sydney, +61 2 8256
0325.
Media Relations: Iselle Gonzalez, Sydney, Tel: +612 8256 0326, Email:
[email protected]; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email:
[email protected].
Additional information is available at www.fitchratings.com.