S&P cuts Embraer

S&P said it downgraded its ratings for Embraer SA to BB from BB+. The recovery rating on its senior unsecured notes remains 4.

The pandemic-induced downturn in the aerospace and defense industries hurt Embraer, and S&P said it sees the company continuing to struggle to increase cash flows in 2021 and 2022.

“As a result, we now forecast Embraer’s commercial aircraft deliveries to remain lower than the pre-pandemic levels until at least 2022, leading to much higher leverage. This prompted us to revise our financial risk profile assessment on the company to aggressive from significant,” S&P said in a press release.

The agency now forecasts 50-55 commercial jet deliveries for 2021, down from the previous forecast of 70-75. The reduced deliveries should lead to a cash burn of $100 million - $200 million, resulting in net debt to EBITDA at about 5x and funds from operations (FFO) to debt at 5%-10% in 2021, S&P said.

The outlook is negative.

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