S&P flips Embraer to positive

S&P said it revised Embraer SA’s outlook to positive from negative and affirmed the BB ratings on the company and its senior unsecured debt. The 4 recovery rating is unchanged.

“Embraer delivered positive FOCF in the third quarter of 2021, thanks to higher sales in both executive and commercial aviation and better inventory management. As a result, we now expect the company to post FOCF close to $200 million in fiscal year 2021, leading to a significant improvement in credit metrics after free operating cash burn of $1 billion in 2020,” the agency said in a press release.

S&P said it sees a continued rebound in Embraer’s commercial aircraft deliveries in the next two to three years as global air traffic returns to pre-pandemic levels.

“The positive outlook indicates that we could raise our ratings by one notch if Embraer is able to keep its EBITDA margin above 10% and debt to EBITDA rising to 2x-2.5x on a three-year moving average,” the agency said.

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