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Bond Market News
Embraer Upgraded to IG Status of Baa3 by Moody’s
December 9, 2024
Embraer was upgraded by a notch to IG-status of Baa3 from HY-status of Ba1 by Moody’s. The upgrade reflects the company’s improved credit metrics in 2024, including a recovery in deliveries, operating performance, and backlog. The company has reduced debt proactively, with expectations for further reductions due to strong cash flows and $150mn in proceeds from a legal settlement with Boeing. Embraer is expected to maintain gross leverage below 2.5x and net leverage between 0.5-1.0x, supported by increased deliveries and profitability in its defense business. The company’s backlog grew to $21.1bn in June 2024, up from $18.7bn at end-2023, driven by new orders in commercial aviation. The company also strengthened its liquidity with asset sales, cost reductions, and its partnership with EVE Holdings. From 2021 to 2023, Embraer generated BRL 3.7bn ($873mn) in free cash flow and paid down $1.1bn in debt, enhancing its financial resilience.
Embraer’s dollar bonds traded stable with its 7% 2030s at 106, yielding 5.69%.
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