S&P upgrades Bombardier to ‘B+’ from ‘B’ on deleveraging efforts

Credit ratings agency S&P Global upgraded the Canadian business jet maker Bombardier’s credit rating to ‘B+’ from ‘B’ citing continued progress on reducing debt and a stable business outlook.

“This most recent upgrade highlights Bombardier’s strength and resiliency, as well the effectiveness of our team’s strategic and disciplined financial management, which has allowed us to steadily meet or exceed the company’s guidance for the past three years,” said Bart Demosky, executive vice president and CFO, Bombardier on the ratings upgrade.

“S&P’s latest upgrade comes on the heels of Moody’s recent upgrade of Bombardier’s credit rating to B1 with a stable outlook. This further demonstrates the company’s strengthened financial profile, which is built on a strong and diversified backlog that continues to provide solid ground for the team to stand on and gives us a clear line of sight on our deliveries for the upcoming years.”

S&P also raised rating on the company’s preferred shares to ‘CCC+’ from ‘CCC’. The upgrade follows a period of strong performance for Bombardier.

The company has been growing its higher-margin aftermarket services business, which helps maintain revenue from existing aircraft. Beyond that, S&P noted that Bombardier’s $14.9bn order backlog provides a foundation for earnings growth in 2025. The company is increasing aircraft deliveries this year (from 138 to 150) and expects to maintain that level in the future.

This growth, along with higher prices and strong aftermarket services, should improve profitability.

Furthermore, the company’s healthy liquidity position, with over $1bn in cash on hand, also contributes to the positive outlook.

“Our upgrade also incorporates the flexibility offered by Bombardier’s sizable cash balance (about $1.2bn on March 31, 2024) that we assume will remain above $1bn over the next few years and that we do not net against debt in our leverage calculation,” S&P said in its rating commentary.

However, S&P said there are some risks to this outlook. Demand from traditional business jet customers (ultra-high net worth individuals and fleet operators) might slow down after 2024 due to a potential economic slowdown and increased competition from new aircraft models.