S&P Downgrades Ford To Junk - Biggest Fallen Angel Yet

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S&P Downgrades Ford To Junk - Biggest Fallen Angel Yet

Given where Ford's CDS was trading - more in line with B1/BB- rated American Axle - it should hardly come as a surprise that S&P has finally bitten the bullet and downgraded Ford debt to junk.

Via S&P,

The decision to downgrade Ford Motor Co. from investment grade to speculative grade reflects that the company’s credit m

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etrics and competitive position became borderline for the investment-grade rating prior to the coronavirus outbreak, and the expected downturn in light-vehicle demand made it unlikely that Ford would maintain the required metrics.

Ford Motor Co. announced it is suspending production at its manufacturing sites in Europe for four weeks and halting production in North America to clean these facilities and boost containment efforts for the COVID-19 coronavirus. We expect Ford's EBITDA margin to remain below 6% on a sustained basis and believe that its free operating cash flow to debt is unlikely to exceed 15% on a consistent basis.

Ford has drawn $13.4 billion on its corporate credit facility and $2 billion on its supplemental credit facility. We believe the company's current cash position stands at about $36 billion.

We are downgrading our long-term issuer credit rating to 'BB+' from 'BBB-'. At the same time, we are assigning issue-level ratings of 'BB+' on Ford's unsecured debt.

We are also placing the ratings on CreditWatch with negative implications, which reflects at least a 50% chance that we could lower the ratings depending on factors such as the duration of the plant shutdowns, the rate of cash burn, and the adequacy of Ford's liquidity position.

This S&P move follows Moody's cutting Ford's long-term corporate family rating to Ba2 from Ba1 earlier in the day.

With a total amount of public bonds & loans outstanding around $95.8 billion, according to data compiled by Bloomberg, Ford has just become one of the largest fallen angels yet.


Will this sudden large fallen angel lead to further repricing in the junk bond market, just as the market is dead-cat-bouncing on Fed intervention?

Tyler Durden

Wed, 03/25/2020 - 17:09

Despite Pushback Against FAA, Boeing Shares Extend Plunge As Analyst Downgrades Accelerate

zerohedge News despite pushback against boeing shares extend plunge analyst downgrades accelerate All https://www.zerohedge.com   Discuss    Share
Despite Pushback Against FAA, Boeing Shares Extend Plunge As Analyst Downgrades Accelerate

Boeing said on Sunday that it told U.S. regulators "multiple times" that it had expanded the role of its MCAS system and that the FAA had observed the system operating in flight tests before the 737 Max was certified for service, according to Bloomberg. 

The statement was posted online as a result of Friday's bombshell, when instant messag

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es between senior Boeing pilots came to light. The messages recount an experience that one pilot had during a simulator trial, where he noted that the MCAS software handling performance was "egregious", according to Bloomberg. 

The MCAS system played a direct role in two fatal crashes that killed 346 people. 

Boeing said in its statement on Sunday: “We understand and regret the concern caused by the release of the instant messages. It is unfortunate that this document, which was provided early this year to government investigators, could not be released in a manner that would have allowed for meaningful explanation.”

It continuedBoeing engaged in an extensive process with the FAA to determine pilot training requirements for the 737 MAX 8. This process was a complex, multiyear effort that involved a large number of individuals at both Boeing and the FAA. This effort itself was just a part of a much larger regulatory process for the design, development and certification of the 737 MAX 8.”

Boeing CEO Dennis Muilenburg

On Friday, the FAA spoke out against Boeing for not sharing the transcripts of the messages, even though the company had discovered them months earlier. The documents were turned over to the Justice Department in February, about a month before the second deadly crash. The company says it didn't inform the FAA, because the regulator is "a subject of the same criminal investigation."

The messages were between Mark Forkner, who was Boeing's Chief Technical Pilot for the 737 and another technical pilot, Patrik Gustavsson. The two pilots raised "multiple concerns" about the MCAS system, including not being given data by the company's test pilots and pointing out "troubling behavior" during simulator tests. 

Forkner had earlier assured the FAA that the MCAS system was benign and didn't need to be included in flight manuals. In 2016, the FAA had approved this request from the company. 

But in the messages, Forkner had said that the MCAS system was "running rampant" in the simulator. “Granted, I suck at flying, but even this was egregious,” Forkner, who is now a Southwest pilot, said. 

“So I basically lied to the regulators (unknowingly),” he continued. 

But then, two months later, Forkner emailed the FAA to remind them that the MCAS was not going to be included in flight manuals. 

Forkner's lawyer said: “If you read the whole chat, it is obvious that there was no ‘lie,’. The simulator was not reading right and had to be fixed to fly like the real plane. Mark’s career -- at Air Force, at FAA, and at Boeing -- was about safety. And based on everything he knew, he absolutely thought this plane was safe.”

The timing of this incident couldn't be worse for Boeing. The company was on the fringe of once again trying to rebuild trust from the public and the commercial return of its Max now isn't likely until early 2020. The delays have cost Boeing $8.4 billion and the company's CEO, Dennis Muilenburg, is at risk of losing his job. 

House Transportation and Infrastructure Committee Chairman Peter DeFazio called the messages a "smoking gun" and called for Muilenberg to resign. 

Bernstein analyst Douglas Harned said: “The text messages, as reported, appear to take issues to a next level, suggesting misleading statements from Boeing during the certification process. We need to learn more details before coming to a conclusion regarding what this news means in terms of any legal actions, implications for management, and impact on the timing for a Max return to service.”

    Seth Seifman, an analyst with JPMorgan Chase & Co. said in a note Friday: “From a technical perspective, the revelation need not affect the timing but, in our view, there is a political/public relations aspect of returning the Max. Boeing, regulators, and carriers have to sell the technical and cultural changes credibly -- and while the impact is difficult to quantify, the news is negative.”

    Boeing sent the pilots' messages to the Department of Transportation on Thursday evening, which was followed by a letter from the FAA demanding more information from Boeing's CEO. 

    FAA Administrator Steve Dickson said: “I understand that Boeing discovered the document in its files months ago. I expect your explanation immediately regarding the content of this document and Boeing’s delay in disclosing the document to its safety regulator.”

    The FAA didn't make any comments as to whether or not the revelation would set the timeline for the 737 Max back further. Meanwhile, regulators have required Boeing to perform a new safety analysis of the MCAS system and are requiring "multiple tests that weren’t done prior to the jet’s original certification in 2017."

    Boeing's CEO then called Steve Dickson to respond to the concerns, according to the company, who admitted they are still at the behest of the FAA as it relates to returning the 737 Max back to commercial service.

    “We’ll continue to follow the path to certification as currently outlined by the FAA,” the company said. 

    However, despite the CEO's efforts to rebuild confidence, Boeing shares tumbled on Monday, extending the previous session’s sharp drop after the planemaker received at least two analyst downgrades on increased risk related to the company’s best-selling 737 Max jet.

    UBS wrote that the news “reinforces the perception of and heightens the potential of incomplete disclosure, which inherently puts more money/trust & time at stake.”

    The firm cut its view to neutral from buy, and its price target to $375 from $470.

    “We can no longer defend the shares in light of the latest discoveries, discoveries which significantly increase the risk profile for investors,” wrote Credit Suisse analyst Robert Spingarn, who called the news “indefensible.”

    Credit Suisse cut its view on the stock to neutral from outperform and slashed its price target to $323 from $416. The news “may shatter the fragile trust between regulators and BA,” increasing political risk and potentially undermining public confidence in the aircraft, “which could have [long-term] demand implications.”

    The damage to Boeing’s brand, it added, “could also metastasize to other BA products.”  

    Tyler Durden

    Mon, 10/21/2019 - 10:01


    Disaster Accident


    S&P Downgrades WeWork To 'B-' Due To "Liquidity Strains"

    zerohedge News downgrades wework liquidity strains All https://www.zerohedge.com   Discuss    Share
    S&P Downgrades WeWork To 'B-' Due To "Liquidity Strains"

    WeWork bonds were already plunging, due to the massive cash burn and dwindling cash pile, and tonight S&P downgraded the company's issuer credit rating to 'B-'.

    As a reminder, for every dollar WeWork earned in revenue last year, it lost roughly two.

    As S&P details:

    The downgrade refle

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    cts heightened uncertainty around The We Company's ability to raise capital to support aggressive growth and the pressure this places on liquidity.

    These uncertainties stem from the weak reception of The We Company's IPO, partly related to what we view as subpar governance practices. Governance-linked questions and a series of changes in the week following the S-1 filing have weakened the prospects for a successful IPO by year-end, creating uncertainty about access to alternative capital resources.

    Despite some improvements in governance practices subsequent to the initial filing, it is unclear whether the changes will lift investor sentiment. We also believe the company may struggle to meet its capital investment funding needs and liquidity covenant over the next 12 months.

    At this point, we have not factored in any potential additional capital inflows from SoftBank other than the $1.7 billion due in 2020 ($1.5 billion due in April and $200 million due in the second half of 2020). Underpinning these uncertainties are challenging market conditions including a heightened risk of recession in the U.S., Brexit worries, and a slowdown of the Chinese economy (both London and China are major markets for The We Company).

    The negative outlook is indicative of the uncertainty tied to The We Company's weakening liquidity position and access to capital, following poor reception to its IPO related to scrutiny of corporate leadership and governance practices. It also reflects the risk the company will struggle to fund its capital spending needs absent additional financing, the pivot in corporate leadership, and increased uncertainty about its future direction.

    And the bonds are signaling trouble ahead...

    Paging Masa-san!!


    Tyler Durden

    Thu, 09/26/2019 - 16:13

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