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Bombardier Shares Crater

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Bombardier shares crater on profit warning, Airbus A220 writedown

PUBLISHED THU, JAN 16 20209:55 AM EST
Reuters
 
 
 
 
KEY POINTS
  • Bombardier’s shares fell 37% on Thursday after the company warned of lower 2019 profits and said it might have to write down significantly the value of its partnership with Airbus on A220 jets.
  • Bombardier, which sold control of the A220 to Airbus in 2018 as part of a long-running drive to raise cash and put it on a solid footing, said the venture needed more investment and might be subject to a writedown in fourth quarter results next month.
  • Bombardier is in the middle of a broader restructuring, focusing on its more profitable business jet and rail units.
 

RT: Airbus A220-300 

Airbus members celebrate the landing of an Airbus A220-300 aircraft during its presentation in Colomiers near Toulouse, France, July 10, 2018. Airbus A220 is the new brand for the small CSeries passenger jet acquired from Canada’s Bombardier.
Regis Duvignau | Reuters

Bombardier’s shares fell 37% on Thursday after the company warned of lower 2019 profits and said it might have to write down significantly the value of its partnership with Airbus on A220 jets.

Bombardier, which sold control of the A220 to Airbus in 2018 as part of a long-running drive to raise cash and put it on a solid footing, said the venture needed more investment and might be subject to a writedown in fourth quarter results next month.

 

Under the terms of the deal, Bombardier could oblige Airbus to acquire its 33.58% stake in the program in 2026 for its market value or Airbus could oblige Bombardier to sell the stake.

Airbus, which has a 50.6% stake in the A220 program, said it remained committed to funding the jetliner on its way to profitability.

Bombardier said the program was “winning” with airlines, but latest indications were that it would need more cash to ramp up production, generate lower returns and take longer to break even.

“This may significantly impact the joint venture value,” the Canadian company said. “Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.”

Bombardier is in the middle of a broader restructuring, focusing on its more profitable business jet and rail units.

 

It said delivery of four of its Global 7500 jets, a key revenue driver, had now slipped into the first quarter of 2020.

Faced with lingering problems at several projects in its rail division, Bombardier is weighing if it should direct cash aimed at the partnership toward paying down debt and bolstering rail, said a source familiar with the company’s plans.

“It is a cash deployment question,” the source said.

As of November, the Canada province of Quebec held a 16.36% stake in the A220 program.

A spokesman for Quebec’s economy minister declined to comment.

Free cash flow for 2019 is expected to be negative $1.2 billion, much lower than previously forecast negative $500 million.

Bombardier now expects 2019 adjusted earnings before interest and taxes (EBIT) to be about $400 million, compared with a previously forecast range of between $700 million and $800 million.

The company added it expects to incur a charge of about $350 million in the fourth quarter related to certain UK projects, negotiations with the Swiss Federal Railways (SBB) and higher production costs in Germany.

Bombardier shares were down about 37% at C$1.13 in early trade.

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Bombardier Provides Preliminary Fourth Quarter and Full Year 2019 Financial Results and Updates on Accelerating Deleveraging Phase of Turnaround Plan

Provided by Bombardier Inc/Globe Newswire

  • Financial results expected to be below guidance, driven largely by actions at Transportation to resolve challenging projects
  • Aviation financial results largely on track
  • Company actively pursuing strategic options to accelerate deleveraging
  • Bombardier reassessing future participation in Airbus Canada Limited Partnership

All amounts in this press release are in U.S. dollars unless otherwise indicated.

MONTREAL, Jan. 16, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today announced its preliminary results for the fourth quarter and full year 2019. The Company now expects lower than previously guided financial performance, mainly as a result of actions taken to resolve challenging rail projects, the timing of milestone payments and new orders at Transportation, and the delivery of four Global 7500 aircraft slipping into the first quarter of 2020.  

Preliminary Results for the Fourth Quarter and Full Year 2019

  Fourth Quarter 2019
Expected Results
Full Year 2019
Expected Results
Consolidated Revenues ~$4.2B ~$15.8B
Aviation ~$2.4B ~$7.5B
Transportation ~$1.8B ~$8.3B
Consolidated Adjusted EBIT1,2 ~$(130)M ~$400M
Aviation ~6% ~7%
Transportation ~(13)% ~1%
Consolidated Adjusted EBITDA1,2 ~$0M ~$830M
Free Cash Flow1 ~$1.0B ~$(1.2)B
Aircraft deliveries (in units) 58 175
Business Aircraft 52
Incl. 6 Global 7500
142
Incl. 11 Global 7500
Commercial Aircraft 6 33
Backlog aat December 31, 2019    
Business aircraft ~$14.4B  
Transportation ~$35.7B  

1 Non-GAAP financial measures. Refer to the Caution regarding Non-GAAP financial measures below for definitions of these metrics.

2 Excludes Airbus Canada Limited Partnership (ACLP) equity pick-up.

Aviation deliveries were strong in the quarter, totalling 58 aircraft in the fourth quarter for a total of 175 aircraft for the full year. This included 11 Global 7500, six of which were delivered in the fourth quarter. The remaining Global 7500 aircraft originally scheduled for delivery in the final days of 2019 are now expected to be delivered in the first quarter of 2020. As Aviation made good progress ramping up the Global 7500, its full year adjusted EBIT margin is still expected to be approximately 7.0%, in line with full year guidance.

At Transportation, the fourth quarter adjusted EBIT loss is anticipated to be approximately $230 million. This includes a charge of approximately $350 million related to certain projects in the UK (the Aventra platform), commercial negotiations with Swiss Federal Railways (SBB), and increased production and manufacturing costs for projects in Germany.

Delays in achieving technical milestones, including multi-unit software homologation for the London Overground’s LoTrain project (an Aventra project), and execution of production ramp-up required the Company to re-align certain delivery schedules with customers and absorb additional costs. Having achieved these milestones in the fourth quarter, Bombardier has entered into commercial negotiations with customers – to reset schedules, resolve late delivery penalties, and address related provisions and costs.

Consolidated free cash flow for the fourth quarter is estimated at approximately $1.0 billion, approximately $650 million lower than anticipated. This is largely due to the timing of cash inflows from milestone payments on large Transportation projects, and the later-than-anticipated closing of certain orders and call-offs. While the free cash flow shortfall is largely expected to be recovered in 2020, the recovery will be offset by the cash flow impact of the incremental costs recognized in the fourth quarter adjustments at Transportation.

While fourth quarter financial performance at Transportation was lower than expected, the Company continues to make significant progress completing legacy projects and to take the right actions to position the business for long-term success.

Airbus Canada Limited Partnership Update (ACLP)
With its exit from Commercial Aerospace, Bombardier is reassessing its ongoing participation in ACLP.

While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from ACLP calls for additional cash investments to support production ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program. This may significantly impact the joint venture value. Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.   

Acceleration of Deleveraging Phase of Turnaround

Liquidity remains strong, with year-end cash on hand of approximately $2.6 billion. The CRJ program sale to Mitsubishi Heavy Industries, Ltd (MHI) and Aerostructures sale to Spirit AeroSystems Holding, Inc., both of which are still tracking to close by mid-year, will provide an additional $1.1 billion of cash subject to customary closing adjustments. The Company has received most of the regulatory approvals required for closing of the CRJ sale.

Consistent with Bombardier’s five-year turnaround plan, and following a comprehensive review of strategic alternatives, the Company is actively pursuing options to strengthen its balance sheet and enhance shareholder value.

“Since launching our turnaround plan, we have addressed our underperforming aerospace assets, completed our heavy investment cycle, and put the Company on a solid path toward organic growth and margin expansion while prudently managing our liquidity and heavy debt load,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “The final step in our turnaround is to de-lever and solve our capital structure. We are actively pursuing alternatives that would allow us to accelerate our debt paydown. The objective is to position the business for long-term success with greater operating and financial flexibility.”

The Company will provide additional information when it reports its fourth quarter and full year 2019 financial results on February 13, 2020. 

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If I’m reading this correctly Bombardier is contemplating selling out entirely to Airbus on the 220 joint venture because they can’t fund their share of ongoing costs.  Selling under duress doesn’t usually produce value.  But on the other hand cash is king.  Bombardier doesn’t have it, and needs an infusion for restructuring.  Sell the rest of the c-series is definitely an option.  A better option than another bailout. I hope they get better than a buck this time.

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Bombardier and Thyssenkrupp: A tale of two industrial calamities

The moral of the story? Don’t bite off more than you can chew, Chris Bryant writes.

  • Calgary Herald
  • 27 Jan 2020
  • Bloomberg Chris Bryant is a Bloomberg Opinion columnist covering industrial companies.
img?regionKey=bnrY1Nos3qH4Soje33zUqw%3d%3dPAUL FAITH/AFP/GETTY IMAGES Hubris, shoddy governance and poor project management have played roles in the downfall of Bombardier and Thyssenkrupp, Chris Bryant writes. Above, Bombardier’s Belfast factory.

Canadian transportation champion Bombardier Inc. is running out of road. Its shares lost more than one-third of their already much diminished value earlier this month after another disastrous profit warning.

The Montreal-based trains and private jet manufacturer may be forced to exit its commercial aerospace joint venture with Airbus SE because of a shortage of cash; a writedown looms when the group reports 2019 results next month. In the meantime, it’s looking at ways to accelerate repayment of its Us$10-billion debt pile, which suggests a breakup might be on the cards. Bombardier has held talks about a combination of its rail businesses with French rival Alstom SA, Bloomberg reported last week, adding that this is one of several options being considered.

On the other side of the Atlantic another storied industrial conglomerate, Thyssenkrupp AG, is suffering a comparable crisis. The Essen, Germany-based steel and car-parts maker has put its prized elevator division up for sale to help with its massive debt and pension liabilities.

When their respective restructurings are completed, these vast and politically important employers will be shadows of their former selves. Thyssenkrupp has already been booted from Germany’s benchmark Dax index, while Bombardier’s on the cusp of becoming a penny stock (again).

So how did they get into such a mess and why haven’t they managed to extricate themselves, despite years of restructuring and several false dawns? In both cases, hubris, shoddy governance and poor project management have played a role in their downfall.

The fate of the two companies was sealed about a decade ago when they bet the farm on highrisk growth strategies — and lost. Bombardier signed off on the C-series, an ambitious attempt to break Airbus and Boeing Co.’s lock on the commercial aerospace market. The small, fuel-efficient jet won rave reviews but orders were disappointing and delays caused costs to balloon to about US$6 billion and debt to pile up. Bombardier made things worse by trying to bring several new business jets to market at the same time. Weak sales forced it to abandon development of the Learjet 85 — resulting in a Us$2.5-billion writedown — and to cede control of the C-series to Airbus for the humiliating sum of one Canadian dollar.

Thyssenkrupp’s original sin was sinking about 12 billion euros (US$13.3 billion) into a pair of steel plants in Brazil and the

U.S. to try to keep pace with the acquisitive Arcelormittal SA. Poor construction work and a faulty business plan led to massive losses from which Thyssenkrupp has never really recovered.

Woeful governance had a hand in both corporate disasters. Bombardier has a dual-share structure that gives the founding Bombardier-beaudoin families majority voting control even though they own a much smaller fraction of the share capital. Pierre Beaudoin served as CEO from 2008 until 2015 — during which time his father, Laurent, remained chairman — but he didn’t do a very good job. Pierre is now the chairman.

Thyssenkrupp’s anchor shareholder, the Krupp Foundation, presided over a management culture that prized fealty and the preservation of corporate perks, including the company’s hunting grounds, but failed to prevent compliance breaches.

In their attempt to stop the rot, Thyssenkrupp and Bombardier have followed a similar script. Scrap the dividend, sell underperforming assets, slash thousands of jobs and cut costs. But the cash flow needed to cut debt has never consistently materialized and things have got worse.

A problem for both companies has been estimating the cost and completion date of large projects. It’s one reason why Thyssenkrupp’s industrial plant construction unit — once a decent source of cash flow from large customer prepayments — has become a bottomless money pit (the unit is now up for sale). At Bombardier, several high-profile train projects have run late and over budget. Bombardier must pay penalties for late delivery.

Judging by their balance sheets, both companies appear to be in trouble. Thyssenkrupp has just 2.2 billion euros in net assets, while Bombardier’s liabilities far exceed its reported assets.

However, unlike Bombardier’s, Thyssenkrupp’s bonds still trade well above par and its 7.4-billion euros market capitalization is almost four times that of the Canadian company. That’s because Thyssenkrupp still has something of value to sell: The elevators unit could fetch more than 15 billion euros if management decides to part with all of it.

Bombardier doesn’t face an immediate cash crunch thanks to the proceeds of recent asset sales and no big debt maturities this year.

For both businesses, the difficulty with flogging more silverware is that what’s left over probably won’t generate much profit.

The moral of these twin corporate calamities is simple: If tens of thousands of people depend on you for employment, don’t bite off more than you can chew. And make sure the higher-ups know what’s going on.

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On 1/17/2020 at 6:57 AM, Turbofan said:

If I’m reading this correctly Bombardier is contemplating selling out entirely to Airbus on the 220 joint venture because they can’t fund their share of ongoing costs.  Selling under duress doesn’t usually produce value.  But on the other hand cash is king.  Bombardier doesn’t have it, and needs an infusion for restructuring.  Sell the rest of the c-series is definitely an option.  A better option than another bailout. I hope they get better than a buck this time.

Then maybe they can pay back the taxpayers of Canada for the billions upon billions they've been lent? 

😂😂😂

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Another case of mismanagement causing a company to Thrive into Bankruptcy

 

  • Haha 1

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9 hours ago, Falken said:

Time to dump the management team again for a Hunter Harris airline type of leader!

Do you mean Hollis Harris?

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Fresh Quebec cash injection in A220 program is ‘out of the question,’ Legault says

News provided by the Montreal Gazette – link to full story and updates

Quebec has no appetite for a fresh cash injection in the joint venture that builds the A220 jetliner, Premier François Legault said.

FRÉDÉRIC TOMESCO Updated: January 29, 2020

Quebec has no appetite for a fresh cash injection in the Airbus SE-led joint venture that builds the A220 jetliner at the former Bombardier Inc. factory in Mirabel, Premier François Legault said.

“It’s out of the question that we invest in this division,” Legault told reporters in Quebec City. He once again criticized the decision made by former Liberal premier Philippe Couillard to plough money into the aircraft program — formerly known as the C Series — instead of buying a stake in Bombardier.

Legault spoke a day after Economy Minister Pierre Fitzgibbon said Quebec was working with the companies to find ways of preserving aerospace jobs as well as the province’s US$1-billion investment in the A220. Fitzgibbon said he was hopeful of reaching a deal within about 10 days.

Bombardier is reassessing its ongoing involvement in the A220 venture. It vowed two weeks ago to disclose the amount of any write-down connected with the partnership when it reports financial results next month.

Quebec will need to write down the value of its own investment in the program, Legault said. He wouldn’t provide a figure, saying the government is still crunching the numbers.

In the meantime, Quebec is “following the file very closely,” the premier added. “We’re talking with the company, we’re talking with the Caisse de dépôt, we’re talking with eventual partners.”

With files from the Montreal Gazette’s Philip Authier

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7 hours ago, Marshall said:

Quebec will need to write down the value of its own investment in the program, Legault said. 

 

Anybody surprised by this?

Edited by seeker

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18 hours ago, seeker said:

Anybody surprised by this?

Quebec will need to write down the value of its own investment in the program, Legault said. 

While they hold the rest of the country to ransom 💰.............

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2 hours ago, Kasey said:

Quebec will need to write down the value of its own investment in the program, Legault said. 

While they hold the rest of the country to ransom 💰.............

Writing down an asset doesn't require any cash. Also, If you remember, the federal government's latest support of Bombardier was in the form of loans that went into the development of the new business jets, which are selling really well.

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26 minutes ago, dagger said:

Writing down an asset doesn't require any cash. Also, If you remember, the federal government's latest support of Bombardier was in the form of loans that went into the development of the new business jets, which are selling really well.

All we can hope is that Bombardier hangs around ,they do employ a considerable number of our fellow Canadians  (as of May 22, 2018  Bombardier employed more than 69,500 people worldwide, including 23,000 in Canada. ) and are able to pay back those loans.

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Instead of Trudeau borrowing another 30 or so Billion for who knows what, why not buy this company, put in new management

at least we would have something and keep the jobs.His daddy bought Fina(?) Petrocan.

 

 

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Bombardier reportedly in talks to sell business-jet unit to Textron

Provided by The Globe and Mail – link to full story and updates

REUTERS PUBLISHED FEBRUARY 4, 2020

QY2PAIAISNFGRJW6NYQ4SY5L74.JPG Workers apply a Rolls Royce decal to the engine of a Bombardier Global 6500 business jet at the Bombardier booth at the National Business Aviation Association exhibition in Las Vegas on Oct. 21, 2019.DAVID BECKER/REUTERS

Bombardier Inc. is in talks to sell its business-jet unit to the U.S. maker of Cessna jets, Textron Inc., The Wall Street Journal reported, citing people familiar with the matter.

The move will help the struggling Canadian train and plane maker to pare billions of dollars in debt, the report said.

Bombardier’s shares have plunged more than 30 per cent so far this year. On Jan. 16, the company flagged a 2019 profit warning, citing problematic rail contracts, and warned of a potential writedown in the value of a plane partnership with European plane maker Airbus.

Bombardier declined comment on the WSJ report, but a source familiar with the company’s thinking told Reuters it was holding talks over both rail and aviation assets to keep all its options open.

Acquiring Bombardier’s business jet unit would add the Global series of large-cabin aircraft to Textron’s portfolio, which mostly makes small- and medium-sized corporate planes.

Analysts have said that a deal would expand the U.S. company’s aircraft offerings, allowing it to offer a complete family of jets to a wider range of customers.

Textron declined to comment. Shares of the company rose more than 9 per cent, while those of Bombardier’s were up more than 10 per cent.

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Another Canadian company leaving that's joining P&WC, Inco, dash8  nor415 no longer owned by us,Tech Cominco, and even our beloved Tim Hortons Etc.  

Just heard Encana leaves today also - in Canada since late 1800s.

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does this mean we will be repaid the loans?

Bombardier nears deal to sell stake in Airbus A220 program

News provided by the Toronto Star – link to full story and updates

By Brendan Case, Bloomberg Fri., Feb. 7, 2020

c-grov-1.jpg?w=1024 Air Canada Airbus 220-300

Bombardier Inc.’s ill-fated foray into building jetliners may be nearing an end, and investors are applauding.

bbd_logo_bk_large.jpg?w=1024

The company is in advanced talks to sell its stake in Airbus SE’s A220 program to the European aerospace giant, the Wall Street Journal reported Friday.

A deal for Bombardier’s 34 per cent holding in the venture could be reached as early as next week, the newspaper said, citing people familiar with the matter.

Quebec, which owns 16 per cent of the program, would retain its stake.

Walking away from the A220 would close the book on Bombardier’s involvement in an aircraft program in which the company invested more than $6 billion (U.S.) amid a series of development delays and cost overruns.

Bombardier, creaking under heavy debt and struggling to sell the all-new single-aisle plane, ceded control of the program to Airbus in 2018 while retaining a minority participation.

Financial terms of the Airbus-Bombardier deal couldn’t be learned, the Journal said.

The talks could still fall apart and the outlines of any agreements could change, the newspaper said.

Both companies are scheduled to report earnings Feb. 13.

Bombardier climbed 4.5 per cent to $1.49 (Canadian) at 3:34 p.m. in Toronto, reversing losses after the Journal’s story.

A sale of the company’s stake in the A220, which was originally known as the C Series, would also be a milestone for cash-strapped Bombardier as it weighs selling other key businesses in a potentially far-reaching revamp. Saddled with a $10-billion (U.S.) debt load, the Montreal-based company has held talks to combine its rail-equipment operation with France’s Alstom SA. It’s also exploring a sale of its private-jet unit to Textron Inc., the Journal reported earlier this week.Get more business in your inboxGet the business news and analysis that matters most every morning in our Star Business email newsletter.

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If just a fraction of what I have heard Airbus is planning for Mirabel is true the aide to the C Series was the best money ever spent. I don't think it has been widely recognized just how big a deal Airbus planting their feet here is. This will be as transformative for Quebec as the foreign automakers setting up in the American south was.

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.

One more problem plaguing beleaguered Bombardier: its underfunded pension plans

Mon Feb 17, 2020 - The Globe and Mail
David Milstead - Institutional Investment Reporter

Bombardier Inc. is getting smaller, but its pension deficit – the gap between what it owes employees in retirement and the money it has on hand to pay them – is getting bigger.

The company’s annual financial statements filed Thursday reveal that the deficit in the company’s defined-benefit pension plans crept up to US$1.97-billion at the end of 2019, versus US$1.92-billion in 2018.

The numbers have remained stubbornly high in recent years even as Bombardier sheds businesses, their employees and the pension obligations that come with them. The deficit in the company’s pension plans spiked to US$2.2-billion in 2016 and has only fallen gradually since, despite divestitures and other techniques to reduce obligations.

While analysts and investors are focused on Bombardier’s looming debt, the pension deficit is an additional obligation that has received less attention. And on top of the pension, Bombardier also owed US$273-million in other retirement benefits, such as health care, to its workers.

The numbers could change dramatically if the company succeeds in disposing of more of itself. Bombardier is on the verge of selling its rail business to French industrial giant Alstom SA. The sale is seen as a crucial cash-generating step for the company, as it owes more than US$9-billion to banks and bondholders.

Bombardier chief financial officer John Di Bert said Thursday that about 40 per cent of the company’s pension deficit comes from its transportation division and 60 per cent from aviation.

Many older companies, from manufacturing to retail to transportation, have struggled with defined-benefit (DB) pension plans, which promise retirees a set payout usually based on a formula that includes salary and years with the company. Fluctuating interest rates and irregular investment returns can create a mismatch between what’s owed and the assets of a plan – and if the gap isn’t narrowed, big companies can find themselves pumping hundreds of millions of dollars into their pensions.

Younger companies offer only defined contribution (DC) plans, which put the investing onus on the worker, and the payout in retirement uncertain. Bombardier cut off access to the DB plans for all newly hired Canadian and U.S. employees in September, 2013, putting them in DC plans instead. It closed its British DB plans as well.

Bombardier’s 2019 financial results show the wild swings that can cause stomach upset for plan sponsors. The present value of future payments to retirees – the plan’s liabilities – are discounted to today's dollars using an interest rate. The lower the interest rate, the bigger the present-day value.

Falling interest rates in 2019 were the biggest contributor to a US$1.45-billion increase in liabilities because of changes in assumptions. (Every change of 0.25 percentage points in Bombardier’s assumed interest rate adds or subtracts US$514-million to liabilities, the company says.)

The flip side: Investment returns added an extra US$954-million to the plan.

The year-end 2019 pension numbers have already removed the 4,000 employees of the company’s Aerostructure business, scheduled for sale in 2020, and the US$414-million deficit for their pensions.

Without that change, the deficit would have topped US$2.3-billion – a dollar amount that’s roughly 75 per cent of the company’s market capitalization.

.

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Bombardier Announces its Strategic Decision to Focus on Business Aviation and its Intent to Accelerate Deleveraging through Sale of Transportation Division to Alstom

Provided by Bombardier Inc/Globe Newswire

bbd_logo_bk_large.jpg?w=1024
  • Bombardier, a world leader in business aviation, is well-positioned to compete in the business jet market
  • Alstom to acquire Bombardier Transportation at an Enterprise Value of $8.2 billion (EUR 7.45 billion)
  • Transaction will retire la Caisse’s participation in Bombardier Transportation (BT), la Caisse to become largest shareholder of Alstom
  • Following adjustments for liabilities, net of BT cash, and la Caisse’s interest, expected net proceeds between $4.2 and 4.5 billion will reshape capital structure 
  • Closing expected first half of 2021, subject to customary regulatory approvals

All amounts in this press release are in U.S. dollars unless otherwise indicated. Amounts in EUR are converted to USD at an 1.1 exchange rate.

MONTRÉAL, Feb. 17, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today announced that it has made the strategic decision to focus exclusively on business aviation and plans to accelerate its deleveraging through the sale of its rail business.

“Today marks an exciting new chapter for Bombardier. Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading $7.0 billion business aircraft franchise. With a stronger balance sheet after the completion of this transaction, an industry-leading portfolio of products, a strong backlog, and a rapidly growing aftermarket business, we will compete in this market from a position of strength,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc.

Bombardier Transportation Sale Overview

Bombardier has signed a Memorandum of Understanding (MOU) with Alstom SA and the Caisse de dépôt et placement du Québec (“la Caisse”) for the sale of its Transportation business to Alstom. Under the transaction, Bombardier and la Caisse will sell their interests in Bombardier Transportation to Alstom on the basis of an enterprise value of $8.2 billion (EUR ~7.45 billion). Total proceeds, after the deduction of debt-like items and transferred liabilities, including pension obligations, and net of BT cash, are expected to be approximately $6.4 billion, subject to upward adjustments of up to $440 million. After deducting la Caisse’s equity position between $2.1 billion and $2.3 billion, Bombardier would receive net proceeds of between $4.2 to $4.5 billion, including $550 million of Alstom shares for a fixed subscription price of EUR 47.50, monetizable after a three-month lock-up post-closing, subject to closing adjustments, indemnities and the EUR to USD exchange rate. Bombardier intends to direct these proceeds towards debt paydown and will evaluate the most efficient debt reduction strategies.

The transaction recognizes the significant value created at Transportation since the beginning of the turnaround.

“Selling the rail business will allow us to reshape and redefine our capital structure. Adding a substantial amount of cash to the balance sheet, and removing la Caisse preferred equity in Transportation, will change the game for Bombardier,” continued Bellemare. “Including expected proceeds from previously announced transactions, Bombardier would have between $6.5 and $7.0 billion of pro forma1 cash on hand, putting the Company on a brand-new footing to address its $9.3 billion of debt.”  The signing of the MOU has been unanimously approved by each of Bombardier and Alstom’s board of directors, and the transaction announced today is fully supported by la Caisse, who will become a new long-term shareholder of Alstom.

“We are confident that the sale of our rail business to Alstom is the right action for all stakeholders. As a company, their mission to provide the world’s most efficient mobility solutions, their commitment to technology and their focus on sustainability will serve our customers well. They also appreciate and value our technology and capabilities. Above all, they recognize our talented and passionate employees and the great work they have done,” Bellemare stated.

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What about Ski-Doos?  Nobody’s talking about Ski-Doos! Maybe it’s time they went back to their roots!

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