January 17, 2020 / 5:23 PM / a month ago

S&P lowers outlook on Bombardier to negative from stable

Jan 17 (Reuters) - S&P Global Ratings on Friday joined fellow credit rating agency Moody’s Investors Service in cutting its outlook for Bombardier Inc to negative from stable, a day after the company lowered its 2019 profit and cash flow guidance.

The Canadian plane and train maker warned its 2019 profits would be lower, citing problematic rail contracts, challenges at its business transportation segment and the delayed delivery of its Global 7500 aircraft.

S&P said Bombardier’s weak outlook lowered its conviction that the company could generate positive free operating cash flow beyond 2019 which it believes is necessary for reducing debt.

The rating agency said it expects the free cash flow to be negative in 2020, with poor prospects for material improvement in 2021, and added that if this happened, there could be a further downgrade over the next 12 months.

Bombardier said it now expects free cash flow usage of about $1.2 billion for 2019, marking the third cut to its forecast since the beginning of 2019.

The company’s rail division, its largest unit by revenue, is struggling with three rail projects in Europe, resulting in a $350 million charge.

Moody’s on Thursday also changed the rating outlook for Bombardier to negative from stable. (Reporting by Dominic Roshan K. L. in Bengaluru Editing by Saumyadeb Chakrabarty)

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