Moody's Ratings announced an upgrade of ATS Corporation's corporate family rating to Ba2 from Ba3 on Tuesday, attributing the move to a marked reduction in leverage during the last 12 months and expectations that the company will sustain organic growth.
The credit agency concurrently raised ATS's probability of default to Ba2-PD from Ba3-PD and elevated its senior unsecured notes rating to Ba3 from B1. Moody's left the speculative-grade liquidity rating unchanged at SGL-2 and maintained a stable outlook on the issuer.
Improved credit metrics
Moody's highlighted that ATS's credit profile strengthened substantially over the year, with leverage falling to 3.7x at Q4 FY2026 from 5.1x at Q4 FY2025. The rating action reflected several cash-flow and balance-sheet improvements: an EBITDA recovery as projects returned to normalized levels, substantial debt repayments, and stronger free cash flow. The agency noted that the free cash flow improvement was aided by a one-time cash receipt tied to an EV settlement. Additionally, limited needs for acquisition funding in FY2026 supported the company's deleveraging trajectory.
Business mix and growth outlook
Moody's cited ATS's geographic reach and end-market diversification as positive attributes for the credit profile. The firm pointed to growing revenue concentration in more tightly regulated, higher-margin sectors such as life sciences and energy. According to the rating agency, strong bookings and visible backlog, together with a more resilient business mix, underpin expectations for ongoing organic growth and further reductions in leverage, with debt to EBITDA expected to fall below 3.5x by the end of FY2027.
Liquidity position
Moody's expects ATS to maintain adequate liquidity over the next 12 months, estimating available sources of about C$1.3 billion. That figure comprises roughly C$285 million of cash on hand as of March 31, 2026, projected free cash flow of around C$150 million over the next four quarters to June 2027, and full availability under a C$900 million revolver that expires in December 2029.
Constraints and execution risks
Despite the upgrade, Moody's flagged ongoing constraints that could weigh on the company's rating. These include an active acquisition strategy that could require releveraging and carries execution risk, ATS's relatively small scale versus larger competitors in a competitive environment, the potential for volatile order bookings inherent in a cyclical manufacturing industry, and earnings volatility stemming from exposure to individual projects.
Rating sensitivities
Moody's set clear milestones for future rating movements. An upgrade would be possible if ATS increases its business scale and diversification, sustains positive free cash flow, and keeps debt to EBITDA below 2.5x. Conversely, the ratings could be downgraded if leverage remains above 4.0x on a sustained basis, liquidity weakens, or if revenue and EBITDA continue to decline.
Outlook
Overall, the upgrade reflects a one-year improvement in leverage and cash generation, reinforced by expectations that ATS's stronger bookings, backlog transparency, and favorable mix shifts toward regulated, higher-margin end markets will support continued organic growth and further deleveraging.