Montreal based Bombardier Inc. has received a one notch upgrade by Moody’s after it announced a new $750mn 5Y bond issuance. The jet manufacturer’s corporate family rating and senior unsecured bonds have been upgraded to Caa1 from Caa2 and its probability of default rating has been raised to Caa1-PD from Caa2-PD. The outlook of the company has been revised to stable from negative by both S&P as well as Moody’s. While, S&P has affirmed the company’s CCC+ rating, it has raised the issue-level ratings on the senior notes to CCC+ from CCC. In addition, the new notes have been assigned a Caa1 and CCC+ rating by Moody’s and S&P respectively. The new issuance will allow the highly indebted plane manufacturer to address its near term refinancing risks.
The high leverage had forced Bombardier to initiate measures to improve its liquidity. It repaid debt of $2.7bn on its bonds maturing in 2021 and 2023 through the sale of its Transportation business to Alstom in January this year. It also refinanced $1bn worth of 2022s and 2023s in June. The proposed issuance would ensure that the plane maker has either repaid or extended its debt with maturities through 2024, thus significantly improving its refinancing risk. According to Moody’s the company gains from “adequate liquidity over the next year, significant scale, and a good market position in its remaining business jet segment, and a nearly $11 billion backlog.” The company still remains constrained by the cash flow consumption due to debt maturities, high leverage of 20x in 2021 and 11x in 2022, annual interest of $800mn, execution risks and high competition. S&P forecasts the company EBITDA at $800mn by 2022 and discretionary free cash flow of $250mn by 2023. It also expects ~$7.1bn and ~$8.4bn of reported and adjusted debt in the near term.