By Amey Stone
Problems in its business and commercial jet businesses are weighing on Montreal-based Bombardier (CA:BBD.B). As a result, Standard & Poor’s downgraded its credit rating to B-minus, from B on Friday. That’s just one notch above the perilous triple-C ratings that indicates it is an extremely speculative investment.
S&P credit analyst Aniki Saha-Yannopoulos explained:
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.
Bombardier’s C-Series planes haven’t been able to ramp up production as much as expected due to delivery delays from the maker of the engines.
S&P says:
We believe the company remains exposed to weaker-than-expected market conditions in its key end market, or further delays in its C-Series program that could precipitate higher than expected cash flow deficits and limit its financial flexibility. Furthermore, we view a material improvement in the company’s highly leveraged credit measures, which are potentially unsustainable over the longer term, as unlikely at least through 2018.
On the bright side, with the downgrade, S&P now has a “stable” outlook on Bombardier, which indicates future downgrades are unlikely for at least the next year. S&P reports:
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.