Stock Falls To Historic Lows After Debt Rating Lowered To Junk Status

Bombardier stock fell to new lows last week after Moody's downgraded the company's debt to "junk status." A share of Bombardier stock went for more than $26 just four years ago. Today, it's worth less than a tenth of that.

While Moody's indicated falling sales was the reason for downgrading Bombardier's credit, and while the company issued strongly-worded protests, Bombardier officially says the move won't hurt long-term business.

At least some industry watchers agree. The Canadian Press quotes analyst Pierre-Yves Terrisse of Desjardins Securities as saying Bombardier has a strong enough balance sheet that the downgrade should have minimal impact. But there are other issues facing customers, he said.

A salesperson for a competitor might be more than happy to ask a customer, "Are you sure you want to be buying an aircraft from a company that has just been rated junk?" Terrisse told the news agency. "From a competitive point of view it's much more a question: Will potential customers want to award Bombardier a contract given the rating? It's an intangible hangover."

Yet, Bombardier seems financially fit to weather at least a short-term storm. The lowered rating could mean "calls on cash" of up to $431 million over the next two quarters, according to the CP. The company has $4.9 billion in liquid assets, making it a good candidate for longevity.

FMI: www.aerospace.bombardier.com