15.11.2012 23:26
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Bombardier Inc. -- Moody's lowers Bombardier's SGL rating; withdraws rating on new notes

Approximately $5.8 Billion of debt affected

Toronto, November 15, 2012 -- Moody's Investors Service lowered Bombardier's speculative grade liquidity rating to SGL-3 (adequate) from SGL-2 (good) as the company has canceled its proposed $1 billion debt issue that was intended to bolster its liquidity. The company's Ba2 corporate family, probability of default and senior unsecured ratings are unaffected. Bombardier's rating outlook remains negative. Moody's has withdrawn the Ba2 rating on the cancelled debt issue.

DETAILED RATING CONSIDERATIONS

Bombardier's Ba2 rating is driven by its significant scale and diversity, strong global market positions, natural barriers to entry and sizeable backlog levels in both its Aerospace and Transportation business segments. Moody's expects Bombardier will realize modest earnings growth and about $750 million in consolidated free cash flow consumption in 2013 due to lingering economic weakness affecting its Aerospace division, spending associated with the company's sizeable aerospace programs, ongoing margin pressure from recent problem contracts in its Transportation segment and a continuing weak level of cash advances from customers. Consequently, the company's adjusted leverage is likely to remain very high (currently 6.2x) over the 12 to 18 month ratings horizon. Execution risks related to the development of its new CSeries commercial aircraft are also incorporated in the rating and these risks have increased with the six month delay in the aircraft's first flight to June 2013.

Without benefit of the proposed notes issue, Bombardier's $2.1 billion in cash, $1.4 billion (USD equivalent) in total availability under its revolvers and significant free cash flow expected in Q4/12 will provide sufficient resources to fund the cash consumption in 2013. The potential that Bombardier will need to tap its bank facilities to maintain good headroom to minimum liquidity covenants and fund typically heavy seasonal cash usage in Q1 to Q3 causes Moody's to view Bombardier's liquidity as adequate rather than good.

The outlook is negative because Bombardier has consumed more cash than Moody's expected in the past couple of years. A continuation of this trend would lead to a downgrade given that Bombardier's leverage is very high for the rating.

Bombardier's rating could be downgraded if the CSeries is further delayed or if Bombardier's leverage is not expected to reduce below 6x through the ensuing 12-18 months with ongoing expected improvement beyond that timeframe. Further deterioration in the company's liquidity would also cause a downward rating action.

An upgrade would require evidence of a sustained cyclical upturn in Aerospace, resolution of recent operational challenges in Transportation, the successful entry into service of the CSeries, with a growing order book and leverage sustained below 3.5x. As well, the company would need to improve and sustain its liquidity rating above SGL-3.

The principal methodology used in rating Bombardier was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Montreal, Quebec, Canada, Bombardier is a globally diversified manufacturer of business and commercial jets as well as rail transportation equipment. Annual revenues total roughly $17 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Darren M. Kirk VP - Senior Credit Officer Corporate Finance Group Moody'sCanada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635Donald S. Carter, CFA MD - Corporate Finance Corporate Finance Group(416) 214-1635 Releasing Office: Moody's Canada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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