Fitch: Mixed Impact of Recent Developments at Bombardier

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings views Bombardier, Inc's (BBD) planned initial public offering of a minority stake in Bombardier Transportation (BT) as a positive development. The transaction is targeted for the fourth quarter of 2015 (4Q15) and, if completed, would provide a source of funds for reducing BBD's debt and leverage, including debt/EBITDA of approximately 7.6x at March 31, 2015.

Also during its earnings call today, BBD confirmed the launch customer for the CSeries will be Swiss International Airlines. Entry into service (EIS) is now expected in 1H16 while BBD still expects certification of the aircraft by the end of 2015. The EIS date represents a slight delay from the previous estimate of early 2016, but more important rating concerns include the relatively low number of orders for the CSeries and the extended period of high spending to develop new aircraft programs, including the CSeries and Global 7000 and 8000 business jets.

Following substantial debt and equity issuance during 1Q15, BBD has adequate near-term liquidity to fund its aircraft development programs. There are no significant long-term debt maturities scheduled before 2018 and there is little long-term debt at BT. Liquidity included $4.7 billion of cash at March 31, 2015 and $1.3 billion of availability under bank revolvers that were recently extended by one year. However, Fitch estimates free cash flow (FCF) could be negative $900 million - $1 billion or more in 2015 and could remain substantially negative through the next two or three years until development spending declines.

Other recent developments include lower orders for BBD's large business jets in 1Q15, most notably the Global 5000 and 6000 aircraft that are key to BBD's business jet performance. The decline is attributable to lower demand in Russia, China and Latin America, as well as competitive pressure. If demand does not improve, the impact on results would become more evident in 2016 due to the length of the production cycle.

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Fitch Ratings
Primary Analyst
Eric Ause, +1-312-606-2302
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Craig D. Fraser, +1-212-908-0310
Managing Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
[email protected]
Elizabeth Fogerty, +1-212-908-0526
[email protected]

Source: Fitch Ratings

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