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Bond Market News

Bombardier Upgraded to B- by S&P on Deleveraging Efforts

August 24, 2022

Canadian plane manufacturer Bombardier was upgraded to B- from CCC+ with a stable outlook by S&P due to its deleveraging and strong business jet demand. S&P sees market conditions for aircraft OEMs to remain supportive due to tight supply for new aircrafts, and pent-up demand for post-pandemic travel among high-net-worth individuals and business travelers. Bombardier had $2.5bn of net new orders for 1H 2022, a 2.1x unit book-to-bill ratio, and a revenue backlog that was higher by 37% YoY. It posted significantly higher free cash flow of $514mn against its full-year guidance of $50mn further adding to the positive rating action. The company also utilized excess liquidity to redeem $773mn in debt early and is on the path to reduce debt leverage to the mid-8x area this year and to 7-7.5x for 2023. As per the rating agency, Bombardier’s refinancing risk is manageable, with near-term maturities consisting of $510mn in bonds due December and $1.3bn in bonds due March 2025.  S&P expects that the company will maintain liquidity of about $1.5bn, sufficient to support its growth and sustaining any impacts to its business. As of June, total long-term debt stood at $6.3bn. In July, Moody’s had also upgraded Bombardier’s corporate family and senior unsecured ratings to B3 with a stable outlook. The plane-maker had recently also posted an improvement in its financials for the second quarter.

Bombardier’s 7.875% 2027s traded 2.42 points higher to 96.41 to yield 8.83%.

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