Fitch upgrades Bombardier

Fitch Ratings said it upgraded Bombardier Inc.'s issuer default rating and senior unsecured debt to BB from BB- and its preferred stock to B+ from B.

The ratings were removed from Rating Watch positive, and the outlook is positive.

The upgrade reflects the completion of Bombardier's plan, announced in November, to reduce debt by approximately $1 billion by the end of the fiscal year ending Jan. 31. Fitch estimated that Bombardier's pro forma debt-to-EBITDA ratio at Oct. 31 declined to 3.2 times, compared with nearly 4 times as reported.

The ratings and positive outlook are supported by continuing expectations for margin improvement, sales growth and solid cash generation and by Bombardier's diversification, its leading market positions, the health of the business jet and turboprop markets, Bombardier's cash balances, its debt maturity schedule and a large backlog, the agency said.

Rating concerns include relatively low operating margins; business jet market cyclicality; the pension plan deficit; the impact of exchange rate volatility on margins, financial results and planning; and several regional jet concerns, including uncertainty regarding development of new aircraft models and contingent obligations related to past aircraft sales, Fitch added.

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