PrefBlog

Standard & Poor’s has announced:

• We are revising our outlook on Montreal-based Bombardier Inc. to negative from stable.
• The outlook revision follows two recently announced delays to the first flight of Bombardier’s CSeries plane. We believe these delays create a heightened risk of further capital costs for the CSeries program, as well
  as a possible delay in our expected timeline for the recovery of Bombardier’s credit metrics.

• The negative outlook reflects our opinion that Bombardier will be challenged in the next 24 months to improve its credit metrics to be commensurate with a ‘BB’ rating.
• We are also affirming our ‘BB’ long-term corporate credit rating on the company.

…
As of June 30, 2013, the company’s adjusted debt-to-EBITDA leverage ratio was 9x, which we view as very weak for a ‘BB’ rating. The negative outlook also reflects our opinion that Bombardier could be challenged in the next 24 months to improve its credit metrics to be commensurate with a ‘BB’ rating.
…
We could downgrade the company if it is unable to achieve an adjusted debt-to-EBITDA leverage ratio of 8x or lower at year-end 2013. In addition, we could lower our rating on Bombardier if there are further delays in the CSeries program, resulting in increased capital expenditures that would ultimately delay improvement in the adjusted leverage ratio from our current expectations in the next two years and weaken our assessment of the company’s financial risk profile. Furthermore, should Bombardier’s liquidity deteriorate to a point where we believe it will need additional funds over the next two years, we could downgrade the company.

A return to a stable outlook would require Bombardier to be on a definitive path to successfully placing the CSeries into service, which in our view, would support the recovery of its credit metrics, including a funds from operations-to-debt ratio of about 12% or higher by year-end 2014.

This follows the Review-Negative from DBRS.

Bombardier has three series of preferreds outstanding: BBD.PR.B (Ratchet Rate); BBD.PR.C (PerpetualDiscount) and BBD.PR.D (FixedFloater). All are tracked by HIMIPref™; all are assigned to the Scraps index on Credit concerns.

This entry was posted on Thursday, August 15th, 2013 at 10:29 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.