Fitch cuts Bombardier to junk

Fitch Ratings said it downgraded Bombardier Inc.'s and Bombardier Capital Inc.'s senior unsecured debt and credit facilities to BB from BBB- and Bombardier Inc.'s preferred stock to B+ from BB+. Fitch has also withdrawn the F3 commercial paper rating.

The outlook is negative.

Fitch said the downgrade reflects poor free cash flow performance due primarily to slowing growth at Bombardier Transportation; weak operating margins; and continuing concerns regarding regional jet backlog (1.5 years of production) and production rates. Free cash flow and margins are not expected to improve materially in the near term.

The two notch downgrade also reflects concerns that renewed bank facilities in fiscal 2006 may contain covenants or security provisions that could weaken the position of existing debt holders.

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