BBD Downgraded to P-5(low) by S&P

S&P Global Ratings has announced:

  • •Bombardier Inc. has cut its 2016 delivery forecast for the C-Series due to jet engine delivery delays by Pratt & Whitney.
  • •In addition, the business and commercial jet portfolios continue to be pressured due to softer end markets, leading us to revise the business risk profile to weak from fair.
  • •As a result, we are lowering our long-term corporate credit and issue ratings on Bombardier to ‘B-‘ from ‘B’.
  • •We are lowering our global scale and Canada scale ratings on the company’s preferred stock to ‘CCC-‘ and ‘P-5(Low)’
  • •The stable outlook reflects our view that the company’s liquidity provides significant financial flexibility to cover cash flow deficits and any unexpected underperformance through 2017.

“The downgrade primarily reflects our view of the company’s increased sensitivity to protracted weakness in its end markets and future delays to its C-Series program,” said S&P Global Ratings credit analyst Aniki Saha-Yannopoulos.

The ratings on Bombardier reflect what we view as the company’s weak business risk profile and highly leveraged financial risk profile. Our ratings take into consideration the company’s competitive market position in the transportation and business aircraft segments, as well as Bombardier’s product diversity. These positives are offset, in part we believe, by the continued risk associated with Bombardier’s production ramp-up of the C-Series jet, high leverage, weakness in the business jet space, and declining cash flow from both the aerospace and transportation divisions.

The stable outlook reflects our view that even though the company faces multiple risks, it has ample liquidity resources to manage its operations.

The most recent news regarding Bombardier’s core competency is:

Canadian government officials should “make up their minds” on a financial aid request by struggling aircraft maker Bombardier Inc., Quebec Finance Minister Carlos Leitao says.

Quebec announced an aid package for the C Series program late last year, which helped stabilize the Montreal-based company and allowed it to secure sales for the jet, Mr. Leitao said at the Bloomberg Canadian Fixed Income Conference in New York. Quebec finalized the deal in June.

Bombardier also sought federal help late last year, though Prime Minister Justin Trudeau’s government has since sought corporate-governance concessions in exchange for any aid package. Bombardier and the federal government remain locked in a standoff over the matter. Mr. Leitao says federal funding would allow the company to start developing new products.

Philip Proulx, a spokesman for federal Innovation Minister Navdeep Bains, who is leading talks with Bombardier on behalf of Mr. Trudeau’s government, declined to comment directly on whether a decision on the aid request is imminent.

“We want to be part of the solution to help set the company up for long term success,” Mr. Proulx said by e-mail. “That is why we continue to be engaged with the company. For us, the priority is to ensure good quality jobs, R&D investments and head office remains in Canada.”

Affected issues are BBD.PR.B, BBD.PR.C and BBD.PR.D.

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