TEXT - S&P rates Bombardier snr unsecured notes BB
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 RATINGS LIST Bombardier Inc. Corporate credit rating BB/Stable/-- Rating Assigned US$2 billion senior unsecured notes BB Recovery rating 4
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