Finance

Embraer Netherlands Finance BV — Moody’s affirms Embraer’s Ba2 scores; adjustments outlook to secure from detrimental

Score Motion: Moody’s affirms Embraer’s Ba2 scores; adjustments outlook to secure from negativeGlobal Credit score Analysis – 03 Feb 2022New York, February 03, 2022 — Moody’s Buyers Service (“Moody’s”) has at present affirmed Embraer S.A. (Embraer)’s Ba2 company household ranking and senior unsecured debt ranking, and the Ba2 scores of the senior unsecured notes issued by Embraer Abroad Restricted and Embraer Netherlands Finance BV and assured by Embraer. The outlook for all scores was modified to secure from detrimental. Scores affirmed: Issuer: Embraer S.A. Company Household Score: Ba2$500 million international senior notes due 2022: Ba2Issuer: Embraer Netherlands Finance BV$1,000 million Gtd international senior notes due 2025 assured by Embraer S.A.: Ba2Issuer: Embraer Abroad Restricted$540.52 million Gtd international senior notes due 2023 assured by Embraer S.A.: Ba2 Outlook actions: Issuer: Embraer S.A. Outlook modified to Steady from NegativeIssuer: Embraer Netherlands Finance BVOutlook modified to Steady from NegativeIssuer: Embraer Abroad LimitedOutlook modified to Steady from NegativeRATINGS RATIONALEThe change in Embraer’s ranking outlook to secure from detrimental displays (i) the continued enchancment in credit score metrics associated to a gradual restoration in market situations, working efficiency and backlog, and (ii) the development within the firm’s liquidity place following the current asset sale in Portugal, the initiatives to scale back money burn and the enterprise mixture and subsequent IPO of the eVTOL enterprise EVE Holding, Inc. (EVE), all of which mitigates the dangers that would set off a detrimental ranking motion within the brief time period.Moody’s expects that Embraer’s adjusted gross leverage will decline to 7x-6x by year-end 2022 and to 6x-5x in 2023, from round 9x in 2021 and 19.1x in 2020, when credit score metrics have been harm by decrease deliveries associated to the pandemic and the extra debt raised by the corporate to cowl money wants. The restoration will come on the again of upper deliveries of aircrafts within the industrial section, agency demand for providers and assist agreements, government jets, and better profitability within the protection and safety enterprise with the start of commercialization of the KC-390 plane. Regardless of potential volatility in present contracts with the Brazilian authorities, Embraer’s backlog will proceed to develop with further orders within the industrial aviation section, as illustrated by the not too long ago introduced settlement with Azorra for as much as 50 E190-E2 or E195-E2 aircrafts price $3.9 billion primarily based on checklist costs, of which $1.6 billion is firmly dedicated.The corporate’s liquidity profile will even enhance with proceeds from asset gross sales and the anticipated influx associated to the enterprise mixture of EVE in 2022, which is able to assist to scale back internet leverage ratios to under 3x in 2022-23, from round 4x in 2021. Embraer’s money flows will even profit from its technique to scale back money burn by way of effectivity features, equivalent to higher stock administration, discount within the manufacturing cycle of plane by greater than 35% by 2022, and the optimization of investments to answer market the situations, as illustrated by the postponement of the 175-E2 jet entrance to 2024 from 2022 due to the pilot contract scope clause limitations in the US.Such milestones will assist abate liquidity dangers coming from the capital depth of its enterprise and the event prices of the brand new eVTOLs enterprise and investments wanted to adjust to new service agreements — which require much less employed capital than the jet enterprise –, releasing up money for debt discount and a sooner restoration in gross leverage ratios. Decrease money wants will even assist the upkeep of satisfactory internet leverage ratios through the unstable restoration within the firm’s industrial plane enterprise.Embraer’s Ba2 ranking proceed to mirror its strong place as a number one regional jet maker and its status as a dependable airplane producer, bolstered by its good liquidity derived from massive money balances and a manageable debt maturity profile. The Ba2 ranking additionally takes into consideration the truth that funding from Brazilian public banks can be accessible, if wanted. In Moody’s view, Embraer remains to be a strategic asset to the Authorities of Brazil (Ba2 secure), which owns a golden share in Embraer with veto rights.On the identical time, the cyclical nature of the aviation enterprise and rising competitors constrain Embraer’s ranking, notably given the numerous investments required on an ongoing foundation to maintain up with evolving buyer wants. The corporate’s excessive monetary leverage coming from working capital stress and excessive investments, exacerbated by important earnings and money movement erosion through the pandemic, is a further ranking constraint that’s partially mitigated by satisfactory internet leverage ratios. Embraer’s monetary efficiency and stability sheet have been severely hit by the affect of the coronavirus pandemic on demand for brand new industrial and enterprise plane in 2020, with a extra sustained restoration possible solely in 2022-23.LIQUIDITYEmbraer’s good liquidity is a crucial issue underpinning its ranking. The corporate has persistently maintained a excessive money stability, matching the extent of its excellent debt, besides in 2020, when internet leverage elevated due to the extra debt raised through the pandemic and the money burn posted through the disaster. As of the tip of September 2021, the corporate’s money available and short-term investments of BRL13.3 billion have been sufficient to cowl all its debt maturities by way of 2024. Moody’s expects Embraer to proceed to proactively pursue legal responsibility administration initiatives to elongate its debt tenor and cut back debt value, thus preserving its liquidity profile.RATING OUTLOOKThe secure outlook displays Moody’s expectations that Embraer’s credit score metrics will proceed to get well by way of 2023 and that the corporate will preserve its good liquidity to mitigate dangers associated to the volatility in market situations.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSUpward ranking stress is unlikely till Embraer’s credit score metrics and free money movement technology recovers sustainably from the pandemic hunch. Quantitively, an improve would require optimistic free money movement technology on a sustained foundation, and internet leverage ratios strengthening to pre-pandemic ranges of round 2-3x. The upkeep of a robust liquidity profile and of conservative monetary insurance policies would even be required for an improve.Expectations of deeper and longer declines in demand for brand new plane on account of the pandemic, notably if not matched by further sources of liquidity, may lead to a ranking downgrade. A downgrade may additionally end result from wider liquidity issues, as an illustration due to value inflexibility, or from clear expectations that the corporate will be unable to keep up monetary metrics appropriate with a Ba2 ranking following the pandemic with gross adjusted leverage above 5x and retained money movement/internet debt under 15% on a sustained foundation.The principal methodology utilized in these scores was Aerospace and Protection printed in October 2021 and accessible at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287887. Alternatively, please see the Score Methodologies web page on www.moodys.com for a replica of this system.COMPANY PROFILEEmbraer is a number one producer of economic jets with as much as 150 seats, with a rising protection and safety section, and a line of enterprise jets, together with new varieties for the medium-sized and super-medium-sized segments. Based in 1969 by the Brazilian federal authorities and privatized in 1994, Embraer is headquartered in São Jose dos Campos, Brazil. Within the 12 months that ended September 2021, the corporate reported internet income of BRL25.2 billion ($4.6 billion) with an adjusted EBITDA margin of 10.8%.REGULATORY DISCLOSURESFor additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Score Symbols and Definitions could be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For scores issued on a program, sequence, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every ranking of a subsequently issued bond or observe of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived completely from present scores in accordance with Moody’s ranking practices. For scores issued on a assist supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the assist supplier and in relation to every specific credit standing motion for securities that derive their credit score scores from the assist supplier’s credit standing. For provisional scores, this announcement supplies sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive ranking in a fashion that might have affected the ranking. For additional data please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit score assist from the first entity(ies) of this credit standing motion, and whose scores could change on account of this credit standing motion, the related regulatory disclosures shall be these of the guarantor entity. Exceptions to this method exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.These scores are solicited. Please confer with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores accessible on its web site www.moodys.com.Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking evaluate.Moody’s basic rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation could be discovered at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The World Scale Credit score Score on this Credit score Score Announcement was issued by certainly one of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Essential 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Score Businesses. Additional data on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is accessible on www.moodys.com.The World Scale Credit score Score on this Credit score Score Announcement was issued by certainly one of Moody’s associates outdoors the UK and is endorsed by Moody’s Buyers Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA beneath the regulation relevant to credit standing businesses within the UK. Additional data on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is accessible on www.moodys.com.Please see www.moodys.com for any updates on adjustments to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.Please see the scores tab on the issuer/entity web page on www.moodys.com for added regulatory disclosures for every credit standing. Carolina Chimenti Vice President – Senior Analyst Company Finance Group Moody’s America Latina Ltda. Avenida Nacoes Unidas, 12.551 sixteenth Ground, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 0 800 891 2518 Shopper Service: 1 212 553 1653 Marcos Schmidt Affiliate Managing Director Company Finance Group JOURNALISTS: 0 800 891 2518 Shopper Service: 1 212 553 1653 Releasing Workplace: Moody’s Buyers Service, Inc. 250 Greenwich Road New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Shopper Service: 1 212 553 1653 © 2022 Moody’s Company, Moody’s Buyers Service, Inc., Moody’s Analytics, Inc. and/or their licensors and associates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. 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MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All data contained herein is obtained by MOODY’S from sources believed by it to be correct and dependable. Due to the potential of human or mechanical error in addition to different elements, nevertheless, all data contained herein is offered “AS IS” with out guarantee of any variety. MOODY’S adopts all vital measures in order that the knowledge it makes use of in assigning a credit standing is of ample high quality and from sources MOODY’S considers to be dependable together with, when applicable, unbiased third-party sources. Nevertheless, MOODY’S just isn’t an auditor and can’t in each occasion independently confirm or validate data acquired within the ranking course of or in making ready its Publications.To the extent permitted by regulation, MOODY’S and its administrators, officers, workers, brokers, representatives, licensors and suppliers disclaim legal responsibility to any individual or entity for any oblique, particular, consequential, or incidental losses or damages in any way arising from or in reference to the knowledge contained herein or using or lack of ability to make use of any such data, even when MOODY’S or any of its administrators, officers, workers, brokers, representatives, licensors or suppliers is suggested prematurely of the potential of such losses or damages, together with however not restricted to: (a) any lack of current or potential earnings or (b) any loss or injury arising the place the related monetary instrument just isn’t the topic of a selected credit standing assigned by MOODY’S.To the extent permitted by regulation, MOODY’S and its administrators, officers, workers, brokers, representatives, licensors and suppliers disclaim legal responsibility for any direct or compensatory losses or damages brought about to any individual or entity, together with however not restricted to by any negligence (however excluding fraud, willful misconduct or every other kind of legal responsibility that, for the avoidance of doubt, by regulation can’t be excluded) on the a part of, or any contingency inside or past the management of, MOODY’S or any of its administrators, officers, workers, brokers, representatives, licensors or suppliers, arising from or in reference to the knowledge contained herein or using or lack of ability to make use of any such data.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Buyers Service, Inc., a wholly-owned credit standing company subsidiary of Moody’s Company (“MCO”), hereby discloses that almost all issuers of debt securities (together with company and municipal bonds, debentures, notes and industrial paper) and most popular inventory rated by Moody’s Buyers Service, Inc. have, previous to task of any credit standing, agreed to pay to Moody’s Buyers Service, Inc. for credit score scores opinions and providers rendered by it charges starting from $1,000 to roughly $5,000,000. MCO and Moody’s Buyers Service additionally preserve insurance policies and procedures to handle the independence of Moody’s Buyers Service credit score scores and credit standing processes. Info relating to sure affiliations that will exist between administrators of MCO and rated entities, and between entities who maintain credit score scores from Moody’s Buyers Service and have additionally publicly reported to the SEC an possession curiosity in MCO of greater than 5%, is posted yearly at www.moodys.com beneath the heading “Investor Relations — Company Governance — Director and Shareholder Affiliation Coverage.”Further phrases for Australia solely: Any publication into Australia of this doc is pursuant to the Australian Monetary Companies License of MOODY’S affiliate, Moody’s Buyers Service Pty Restricted ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as relevant). This doc is meant to be offered solely to “wholesale purchasers” inside the that means of part 761G of the Firms Act 2001. By persevering with to entry this doc from inside Australia, you signify to MOODY’S that you’re, or are accessing the doc as a consultant of, a “wholesale shopper” and that neither you nor the entity you signify will instantly or not directly disseminate this doc or its contents to “retail purchasers” inside the that means of part 761G of the Firms Act 2001. MOODY’S credit standing is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the fairness securities of the issuer or any type of safety that’s accessible to retail traders.Further phrases for Japan solely: Moody’s Japan Okay.Okay. (“MJKK”) is a wholly-owned credit standing company subsidiary of Moody’s Group Japan G.Okay., which is wholly-owned by Moody’s Abroad Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan Okay.Okay. (“MSFJ”) is a wholly-owned credit standing company subsidiary of MJKK. MSFJ just isn’t a Nationally Acknowledged Statistical Score Group (“NRSRO”). Due to this fact, credit score scores assigned by MSFJ are Non-NRSRO Credit score Scores. Non-NRSRO Credit score Scores are assigned by an entity that’s not a NRSRO and, consequently, the rated obligation is not going to qualify for sure sorts of remedy beneath U.S. legal guidelines. MJKK and MSFJ are credit standing businesses registered with the Japan Monetary Companies Company and their registration numbers are FSA Commissioner (Scores) No. 2 and three respectively.MJKK or MSFJ (as relevant) hereby disclose that almost all issuers of debt securities (together with company and municipal bonds, debentures, notes and industrial paper) and most popular inventory rated by MJKK or MSFJ (as relevant) have, previous to task of any credit standing, agreed to pay to MJKK or MSFJ (as relevant) for credit score scores opinions and providers rendered by it charges starting from JPY100,000 to roughly JPY550,000,000.MJKK and MSFJ additionally preserve insurance policies and procedures to handle Japanese regulatory necessities. ​

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