{"id":40595,"date":"2020-03-24T22:41:43","date_gmt":"2020-03-25T03:41:43","guid":{"rendered":"http:\/\/prefblog.com\/?p=40595"},"modified":"2020-03-24T22:41:43","modified_gmt":"2020-03-25T03:41:43","slug":"bbd-preferreds-downgraded-to-cc-by-sp","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=40595","title":{"rendered":"BBD Preferreds Downgraded to CC by S&#038;P"},"content":{"rendered":"<p>Standard &#038; Poor&#8217;s <a href=\"https:\/\/www.standardandpoors.com\/en_US\/web\/guest\/article\/-\/view\/type\/HTML\/id\/2401215\">has announced<\/a>:<\/p>\n<blockquote>\n<ul>\n<li>In the weaker macroeconomic environment we anticipate, in large part because of the COVID-19 outbreak, Bombardier Inc.&#8217;s capital structure appears to be unsustainable in the long term.\n<li>As a result, S&#038;P Global Ratings lowered its ratings on Bombardier by one notch, including its issuer credit rating on the company to &#8216;CCC+&#8217; from &#8216;B-&#8216;.\n<li>At present, we don&#8217;t believe Bombardier will face a near-term liquidity crisis given the ample cash on its balance sheet at the beginning of the year.\n<li>The negative outlook reflects the possibility of another downgrade if macroeconomic conditions further deteriorate from our expectations leading to our view that Bombardier is likely to consider a distressed exchange offer or sub-par redemption in the near term.<\/ul>\n<p><b>&#8230;<\/b><br \/> In our Feb. 19, 2020, research update on Bombardier, we were expecting S&#038;P Global Ratings&#8217; adjusted debt-to-EBITDA of 6x-7x in 2021. However, we now believe leverage is likely to be higher given our view that earnings and free cash flow prospects for the company&#8217;s business jet division have deteriorated, at least over the next couple of years. While we recognize that large cabin business jets, which will make up the majority of Bombardier&#8217;s sales in future will see less downward pressure than small cabin jets, we expect demand will be lower than previously expected. Given Bombardier&#8217;s high debt load and our expectation for lower earnings and free cash flow generation, we Bombardier&#8217;s financial commitments appear unsustainable in the long term. We acknowledge that our forecast is highly uncertain at this time and the company has yet to provide updated guidance.<\/p>\n<p>The negative outlook reflects our view that Bombardier could pursue a distressed exchange or other debt restructuring in the next 12 months to reduce its debt obligations, which we consider unsustainable in the long-term. In our view, key risks include weaker-than-expected demand from a global recession, and operating disruptions that could lead to a meaningful free cash flow deficit.<\/p>\n<p>We could lower our rating on Bombardier if the company announces a distressed exchange or we consider such an event to be highly likely. This could occur if macroeconomic conditions further deteriorate from our expectations, contributing to a weaker outlook for business jet demand, and a large free cash flow deficit. It could also occur if we believe the acquisition of the company&#8217;s Bombardier Transportation (BT) segment by Alstom S.A. is unlikely to close as proposed.<\/p>\n<p>We could revise the outlook to stable if we see a lower likelihood that Bombardier could pursue a distressed exchange or debt restructuring in the next twelve months. This could be the case if we expect a strong recovery in the second half of this year, leading us to believe that Bombardier&#8217;s capital structure is sustainable in the long-term.<\/p><\/blockquote>\n<p>The rating on these preferreds is now so low that <a href=\"https:\/\/www.spglobal.com\/ratings\/en\/research\/articles\/190705-s-p-global-ratings-definitions-504352\">S&#038;P doesn&#8217;t offer a &#8216;Canadian National Scale&#8217; equivalent with a &#8220;P&#8221; prefix<\/a> &#8230; all the preferreds get is a straight transcription to CC.<\/p>\n<p>Affected issues are BBD.PR.B, BBD.PR.C and BBD.PR.D.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Standard &#038; Poor&#8217;s has announced: In the weaker macroeconomic environment we anticipate, in large part because of the COVID-19 outbreak, Bombardier Inc.&#8217;s capital structure appears to be unsustainable in the long term. As a result, &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-40595","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/40595","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40595"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/40595\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40595"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40595"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40595"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}