Company says the funding agreement with Quebec is not conditional on Ottawa’s participation.Jasper Juinen/Bloomberg
Bombardier Inc. confirmed it has not received the first of two $500-million (U.S.) payments from Quebec for its C Series program as the two sides work to finalize an investment deal announced last October and wait on word from Ottawa as to whether it will join them as a partner.
The plane maker signed a memorandum of understanding with the Quebec government last fall under which the province agreed to invest $1-billion for a 49.5-per-cent equity stake in a new limited partnership containing the assets and liabilities of Bombardier's C Series airliner program as well as warrants for up to 200 million subordinate voting shares. Bombardier would keep control with a 50.5-per-cent stake.
Payment for the investment and issuance of the warrants was expected to occur over two equal instalments, on April 1 and June 30 of this year, subject to the deal closing.
That hasn't happened, Bombardier spokeswoman Isabelle Rondeau said.
"We're still in discussions with the government for the definitive agreement," Ms. Rondeau said Wednesday, adding that carving out the program is a complex legal undertaking. She said the company expects to finalize a deal in the second quarter of 2016 but wasn't more precise.
Bombardier has also asked the Canadian government to make a similar investment in the C Series, a request the majority Liberals have weighed for some time with the help of external advisers including Morgan Stanley.
Debate over whether Ottawa should help the company, and under what conditions, has been heated – with critics pointing out the shortcomings of the company's entrenched owners, while supporters note the significant backing Europe and the United States gives to their leading aerospace manufacturers.
Quebec has always said it wanted a third partner to join the C Series investment group. Almost immediately after it announced its support for Bombardier, it called on Ottawa to match it.
Quebec Transport Minister Jacques Daoust told reporters Wednesday that in the initial scenario contemplated in October, the payments were supposed to go through to Bombardier on the dates specified if everything went as Quebec wanted. "Now, the federal government is being diligent in its analysis. The amounts haven't been disbursed because a final deal hasn't been concluded. I know that negotiations with the federal government are going well."
Mr. Daoust said in February that one option that has been floated with Ottawa is a proposed seven-member board for the new C Series venture, with two members representing Quebec, two representing Ottawa and three representing Bombardier.
The agreement with Quebec is not conditional on a yes or no from Ottawa, Ms. Rondeau said. "The structure of a deal is not conditional to a third party."
While government funding will help reduce balance sheet risk at Bombardier, most of the money will go toward financing C Series losses as opposed to reducing the company's $7-billion in net debt, Bank of Nova Scotia analysts wrote in a Feb. 18 report. "On a fundamental basis, the company is still in the initial stages of a risky multiyear turnaround."
Bank of Montreal analyst Fadi Chamoun said in a Feb. 17 report that he believes Bombardier's current $6.5-billion in liquidity could get tight if the plane maker has to steer through a significant economic downturn, particularly as portions of debt become due. "We believe the potential federal funding is essential to improve the risk profile and visibility into this potentially promising turnaround story," Mr. Chamoun said.
Nicolas Van Praet