NEW YORK (TheStreet) -- Boeing (BA) - Get Report shares rose on Friday after the Dow component won a $3.5 billion contract for the U.S. Air Force's new KC46A aerial-refueling tanker, but Moody's says the development isn't completely positive.

"This is because Boeing still needs to make investments to deliver the airplane under a fixed-price development contract and the development could distract engineering resources from other key programs," the ratings agency points out.

A Boeing employee walks past a Boeing 767 under assembly, Friday, Feb. 25, 2011, in Everett, Wash. Workers rallied at the plant Friday to celebrate Boeing winning a $35 billion Air Force contract for a new aerial tanker fleet that will be based on the 767 airplane.

The credit positives of this new defense contract -- one of the largest to be awarded for some time, is that it extends Boeing's role as the incumbent provider of U.S. aerial-refueling tankers and delays rival and Airbus parent EADS' progress in becoming a top U.S. defense contractor, Moody's noted.

Moody's has an A2, negative rating outlook for Boeing.

The company is the second-largest defense company behind

Lockheed Martin

(LMT) - Get Report

, which Moody's has a Baa1 with stable outlook on.

The Indianapolis Local Public Improvement Bond Bank's $904 million waterworks project revenue bonds has been downgraded to A from A+ by Fitch.

Fitch Ratings and Standard & Poor's use the same ratings scale.

"The downgrade to A from A+ reflects continued erosion of the waterworks system's financial metrics resulting from a protracted rate settlement period as well as the expectation that margins will remain thin even with recent rate relief."

Fitch revised its rating outlook for the bond to stable from negative on expectations that its financial performance won't be deteriorating much further.

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Written by Andrea Tse in New York.

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