Bombardier shares fall to hit 3-year low on TSX
The Bombardier plant in Valcourt, Que. (THE CANADIAN PRESS/Paul Chiasson)
Published Thursday, November 15, 2012 6:11PM EST
MONTREAL -- Bombardier Inc. (TSX:BBD.B) shares hit a three-year low Thursday on the Toronto Stock Exchange amid several downgrades from credit ratings agencies.
Bombardier stock closed down six per cent, or 20 cents per share, to $2.99 on heavy trading of more than 43 million shares. That was the lowest close since March 2009.
The Standard and Poor's ratings agency downgraded Bombardier Inc.'s (TSX:BBD.B) long-term corporate rating one notch Wednesday, following its peers in lowering the plane and train maker's status after a weak earnings report.
And after markets closed Thursday, Moody's lowered Bombardier's liquidity rating to SGL-3, or adequate, from SGL-2, indicating good liquidity, which it had just restored Wednesday. Moody's explained the downgrade comes after the company cancelled its proposed $1 billion debt intended to bolster its liquidity.
S&P said it lowered Bombardier's rating to BB from BB+ 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 CSeries plane, which is currently delayed by six months, will keep the company's leverage ratio high at least until 2014.
Fitch Ratings earlier lowered 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.
Montreal-based Bombardier reported weaker than anticipated results and negative free cash flow in the third quarter.
The results announced last week were impacted 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 usage of cash is being driven by high capital spending for several aircraft development programs, notably the CSeries and Learjet 85.
Bombardier announced last week a six-month delay in the first flight of the CSeries to June, and a corresponding delay to the delivery of the airplane's smaller model. The larger CS300's delivery schedule is unchanged.