Jan 10 - Standard & Poor's Ratings Services today said it assigned its debt
issue and recovery ratings to Montreal-based Bombardier Inc.'s
(BB/Stable/--) proposed US$2 billion aggregate amount of senior unsecured notes.
These obligations comprise two tranches, the breakdown of the amount in each yet
to be determined. We rate the notes 'BB' (the same as the corporate credit
rating on Bombardier), with a recovery rating of '4', which corresponds with
average (30%-50%) recovery in our default scenario. We note, however, that
following the US$2 billion debt issuance the recovery on Bombardier's senior
unsecured debt falls to the low-end of the range for the '4' recovery rating.
The new notes will be senior unsecured obligations of Bombardier, ranking
equally with all other unsecured and unsubordinated indebtedness.
We understand that net proceeds will be used for general corporate purposes.
Although the proposed debt issuance will result in somewhat weaker debt
leverage, with an adjusted gross debt-to-EBITDA ratio expected to be about 7x
at year-end 2013, the company will benefit from US$2 billion in additional
liquidity. We continue to view Bombardier's current liquidity position, with a
US$2.1 billion cash balance at Sept. 30, 2012, as adequate, and we believe the
debt issuance will provide more cushion if capital expenditures were to
increase due to delays in the CSeries programs.
The ratings on Bombardier reflect what we view as the company's satisfactory
business risk profile and aggressive financial risk profile
"Our ratings on Bombardier take into consideration the company's leading
market positions in the transportation and business aircraft segments, its
good cost efficiency, and increasing product range and diversity," said
Standard & Poor's credit analyst Ronald Charbon.
"These positive factors are partially offset, in our opinion, by the financing
pressure Bombardier's customers face in the aerospace and transportation
divisions, significant execution risk in the launch of the company's upcoming
CSeries jet, increasing leverage, and weakening cushion under the financial
covenants," Mr. Charbon added.
Bombardier is engaged in the manufacture of transport solutions worldwide. It
operates in two distinct industries: aerospace and rail transportation. It has
69 production and engineering sites in 23 countries, and a worldwide network
of service centers.
RELATED CRITERIA AND RESEARCH
-- Criteria - Corporates - Industrials: Key Credit Factors: Methodology
And Assumptions On Risks In The Aerospace And Defense Industries, June 24, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Corporate credit rating BB/Stable/--
US$2 billion senior unsecured notes BB
Recovery rating 4