RE:RE:UpgradeIt's getting there.
Here it is.
Rating Action: Moody's upgrades Bombardier's CFR to B3; outlook stable 15 Jul 2022 Toronto, July 15, 2022 -- Moody's Investors Service, ("Moody's") upgraded Bombardier Inc.'s ("Bombardier") corporate family rating (CFR) to B3 from Caa1, its probability of default rating (PDR) to B3-PD from Caa1-PD and senior unsecured notes rating to B3 from Caa1. Moody's also upgraded the company's Speculative Grade Liquidity Rating ("SGL") to SGL-2 from SGL-3. The outlook is stable.
"The upgrade reflects Bombardier's continued progress in reducing debt with $773 million of notional repayments made year to date and its improved financial performance that includes increased earnings, and positive free cash flow" said Jamie Koutsoukis, Moody's analyst.
Upgrades:
..Issuer: Bombardier Inc.
.... Corporate Family Rating, Upgraded to B3 from Caa1
.... Probability of Default Rating, Upgraded to B3-PD from Caa1-PD
.... Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
....Senior Unsecured Regular Bond/Debenture, Upgraded to B3 (LGD4) from Caa1 (LGD4)
..Issuer: Connecticut Development Authority
....Senior Unsecured Revenue Bonds, Upgraded to B3 (LGD4) from Caa1 (LGD4)
Outlook Actions:
..Issuer: Bombardier Inc.
....Outlook, Remains Stable
RATINGS RATIONALE
Bombardier continues to demonstrate improvement in its operations while partially addressing its capital structure. The company has generated positive free cash flow in each quarter since June 2021, and its adjusted EBITDA margin has increased to 14.6% in Q1 2022 compared to 9% during the same period one year ago. Revenue visibility has improved and book to bill was 2.5x in Q1 2022. Additionally, Bombardier continues to repay debt, repaying more than $750 million year to date in 2022.
Bombardier is constrained by 1) high leverage (9.9x at Q1 2022), 2) high fixed charges of about $800 million per year (interest and capital expenditures) that constrain the company's free cash flow, 3) its participation in the cyclical business jet market which has a number of strong competitors, and 4) a significant maturity schedule with $5.8 billion due between December 2024 through to February 2028. Bombardier benefits from 1) good liquidity over the next year, 2) significant scale, 3) a strong market position within the business jet market, and 4) a $13.5 billion backlog.
Bombardier has good liquidity over the next year (SGL-2), with about $1.3 billion of available liquidity sources versus about $200 million of uses. Sources are cash of about $1.1 billion at Q1/22 (profoma its $350 million debt tender in June 2022) and about $160 million in free cash flow through to June 2023. Bombardier has no maturities over the next 12 months. Uses are about $200 million of financial liabilities (excluding term debt but including items such as lease liabilities, liabilities related to various divestitures and government refundable advances). Bombardier doesn't have access to a revolving credit facility. .
The stable outlook reflects the expectation that Bombardier will continue to be cash flow generative and Moody's expectation of an improvement in performance and leverage in 2022 and 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if Bombardier does not address its refinancing needs well in advance of maturity dates, or concerns are developed regarding the adequacy of the company's liquidity. Quantitatively, the rating could also be downgrade if leverage is expected to be sustained above 8x (debt to EBITDA).
Factors that could lead to an upgrade include less debt with adjusted financial leverage below 6x (debt to EBITDA) and continued sustainable free cash flow generation.
Bombardier has a dual class share structure by where the founding family has 50.9% of the voting rights through a special class of stock carrying 10 votes a share. The same group also has four of the company's 14 board seats, despite owning just 12.2% of the equity.
The principal methodology used in these ratings was Aerospace and Defense published in October 2021 and available at
https://ratings.moodys.com/api/rmc-documents/75735. Alternatively, please see the Rating Methodologies page on
https://ratings.moodys.com for a copy of this methodology.
Headquartered in Montreal, Quebec, Canada, Bombardier Inc. is a manufacturer of business jets. Revenues in 2021 were $6.1 billion.
Jamie Koutsoukis
Vice President - Senior Analyst
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
lb1temporary wrote: Great news
Look the difference of definition
Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk
B: Obligations rated B are considered speculative and are subject to high credit risk
It will be a long road but we will arrive.