This time on the Wall Street Journal, article posted today
https://www.wsj.com/finance/vista-gl...- How One Debt-Laden Company Could Create a Storm for Private Jets
- VistaJet’s big pandemic expansion now looks overstretched, posing a risk for Canadian plane maker Bombardier
- Investors are getting increasingly worried: A VistaJet bond issued last May, which was very oversubscribed, is now selling off. On Friday, its yield closed at 17.23%, the highest on record. This means a price of 77 cents on the dollar and a spread over Treasury yields of 13.18 percentage points. Ratings companies haven’t downgraded the bonds, which have a B-minus sub-investment grade. But only 9% of securities in that category trade at spreads above 10 percentage points, the typical threshold for distress, S&P Global Market Intelligence data shows.
- Its net debt increased to an eye-watering 23.5 times equity, up from 7.8 times a year earlier.
- VistaJet’s rapid growth was facilitated by state-backed guarantees. EDC’s transactions with VistaJet amounted to at least 1.7 billion Canadian dollars, equivalent to around $1.3 billion, between 2020 and 2022 alone, official data shows.
- Operating cash flow in 2022 amounted to just 16% of the company’s debts at the end of that year. Meanwhile, soaring bond yields will likely push up the cost of refinancing. A $150 million bond matures this June.
- Were VistaJet to sell some of its Bombardier jets to reduce debt, it would put pressure on used prices. If, in the worst case, the company suddenly collapsed, the impact on the market could be nearly unprecedented.
- Bombardier makes high margins on these premium planes and could struggle to sell new ones if used prices tumble