Standard & Poor’s downgraded Bombardier Inc.’s long-term corporate rating one notch Wednesday, following its peers in lowering the plane and train maker’s status after a weak earnings report.
S&P said it will lower Bombardier’s rating to double-B from double-B-plus due to the company’s “significantly lower-than-expected” cash generation this year as customer advances and operating profit fell amid a weak global economy.
S&P maintained a stable outlook for the company, as it expects stable performance from the company’s rail segment and an overall slight improvement in operating margins.
But it added that heavy capital spending on Bombardier’s C Series plane, which is currently delayed by six months, will keep the company’s leverage ratio high at least until 2014.
Fitch Ratings earlier lower the company’s debt rating and Moody’s shifted its outlook on the company from stable to negative and lowered its liquidity rating, citing similar reasons.
However, Moody’s on Wednesday restored Bombardier’s liquidity rating to SGL-2, indicating good liquidity, citing a “near-absence of current debt maturities.”
But it warned that Bombardier’s rating could be downgraded if the C Series is further delayed or if Bombardier’s leverage is not expected to fall in the next 12 to 18 months.
Montreal-based Bombardier reported weaker than anticipated results and negative free cash flow in the third quarter.
The results announced last week were affected by a slow recovery in regional aircraft and business jet markets and challenges at Bombardier Transportation, the company’s locomotive and rail car manufacturing unit.
Heavy use of cash is being driven by high capital spending for several aircraft development programs, notably the C Series and Learjet 85.
Bombardier announced last week a six-month delay in the first flight of the C Series to June, and a corresponding delay to the delivery of the airplane’s smaller model. The larger CS300’s delivery schedule is unchanged.
Meanwhile, Bombardier Transportation is taking a $150-million (U.S.) charge in the fourth quarter as it lays off 1,200 workers around the world, including 350 affected by the closing of a plant in Germany.
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