Bombardier Inc. is refinancing some of its debt in a move to take advantage of favourable market conditions.
The plane and train manufacturer plans to sell $1.8-billion (U.S.) of senior unsecured notes and the proceeds are to be used to repay about $1.3-billion of existing debt due by 2016 while also boosting Bombardier's cash position by about $500-million, credit rating agency Moody's said on Monday.
"Consequently, Bombardier's pro-forma cash will increase to $3.9-billion and its debt maturity schedule will improve," Moody's analysts Darrin Kirk and Donald Carter said in in a research note.
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Some equity analysts recently voiced concerns over the potential negative impact on the company's financial health related to difficulties Bombardier has been experiencing with development of its new CSeries single-aisle commercial jet. High capital costs of the CSeries and other programs, including the new primarily composite Learjet 85, as well as execution problems in the rail division have been cited as well.
But the financing unveiled Monday does not indicate that Bombardier is facing greater-than-expected financial challenges, say some analysts.
"Most of this [refinancing] will be a refinance of the 2016 debt that is at 7.25 per cent and is now callable. Terms on debt financed recently suggest they will get a rate well below this," RBC Dominion Securities analyst Walter Spracklin said in an e-mail message.
"We are now of the view that they would do well to get added liquidity, so the amount in excess of what they are calling helps that way, but it is not at all a sign of greater financial stress."
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Said Cormark Securities Inc. analyst David Newman: "We believe it is opportunistic to take advantage of the current debt markets to lower its cost of finance, extend its maturities and provide Bombardier with a cushion of safety on its balance sheet in terms of headroom."
Moody's said it now views Bombardier's liquidity as "'good' rather than 'adequate'."