Toronto, November 15, 2012 -- Moody's Investors Service lowered Bombardier's speculative grade liquidity rating to SGL-3 (adequate) from SGL-2 (good) as the company has canceled its proposed $1 billion debt issue that was intended to bolster its liquidity. The company's Ba2 corporate family, probability of default and senior unsecured ratings are unaffected. Bombardier's rating outlook remains negative. Moody's has withdrawn the Ba2 rating on the cancelled debt issue.

DETAILED RATING CONSIDERATIONS

Bombardier's Ba2 rating is driven by its significant scale and diversity, strong global market positions, natural barriers to entry and sizeable backlog levels in both its Aerospace and Transportation business segments. Moody's expects Bombardier will realize modest earnings growth and about $750 million in consolidated free cash flow consumption in 2013 due to lingering economic weakness affecting its Aerospace division, spending associated with the company's sizeable aerospace programs, ongoing margin pressure from recent problem contracts in its Transportation segment and a continuing weak level of cash advances from customers. Consequently, the company's adjusted leverage is likely to remain very high (currently 6.2x) over the 12 to 18 month ratings horizon. Execution risks related to the development of its new CSeries commercial aircraft are also incorporated in the rating and these risks have increased with the six month delay in the aircraft's first flight to June 2013.

Without benefit of the proposed notes issue, Bombardier's $2.1 billion in cash, $1.4 billion (USD equivalent) in total availability under its revolvers and significant free cash flow expected in Q4/12 will provide sufficient resources to fund the cash consumption in 2013. The potential that Bombardier will need to tap its bank facilities to maintain good headroom to minimum liquidity covenants and fund typically heavy seasonal cash usage in Q1 to Q3 causes Moody's to view Bombardier's liquidity as adequate rather than good.

The outlook is negative because Bombardier has consumed more cash than Moody's expected in the past couple of years. A continuation of this trend would lead to a downgrade given that Bombardier's leverage is very high for the rating.

Bombardier's rating could be downgraded if the CSeries is further delayed or if Bombardier's leverage is not expected to reduce below 6x through the ensuing 12-18 months with ongoing expected improvement beyond that timeframe. Further deterioration in the company's liquidity would also cause a downward rating action.

An upgrade would require evidence of a sustained cyclical upturn in Aerospace, resolution of recent operational challenges in Transportation, the successful entry into service of the CSeries, with a growing order book and leverage sustained below 3.5x. As well, the company would need to improve and sustain its liquidity rating above SGL-3.

The principal methodology used in rating Bombardier was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Montreal, Quebec, Canada, Bombardier is a globally diversified manufacturer of business and commercial jets as well as rail transportation equipment. Annual revenues total roughly $17 billion.

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Darren M. Kirk VP - Senior Credit Officer Corporate Finance Group Moody'sCanada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635Donald S. Carter, CFA MD - Corporate Finance Corporate Finance Group(416) 214-1635 Releasing Office: Moody's Canada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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