Bombardier Inc.'s latest, $638-million share offering is fully sold, boosting the Canadian plane maker's balance sheet as it pushes to close its C Series partnership with Airbus SE.
Despite volatile markets, underwriters led by Credit Suisse Securities and National Bank Financial Inc. took just two days to find investors for the entirety of the 168 million class B subordinate voting shares Bombardier put on offer, said people familiar with the sale. A substantial chunk of the enthusiasm came from U.S. buyers, they said.
The stock is priced at $3.80 per share, a 5-per-cent discount to its $4-a-share close in the trading session before the announcement.
The shares closed on Wednesday at $3.68, losing ground in each of the past two sessions as investors unhappy about dilution sold down their positions. The sale will increase the number of diluted shares outstanding by 7.3 per cent not including the overallotment, BMO Capital Markets analyst Fadi Chamoun said.
Underwriters have an option to buy up to 25.2 million more shares for up to 30 days after closing, which would boost the take for Bombardier to $734-million. The close was originally scheduled for March 23.
"This was the right opportunity to increase our cash position and to build further operational flexibility," Bombardier spokesman Simon Letendre said. "The strong demand for this new equity is a vote of confidence in our turnaround plan."
In selling stock, Bombardier is trying to take advantage of the momentum building from a big trade win and a recent partnership deal struck with Airbus on its marquee C Series airliner. The company won a U.S. trade ruling in January that means the planes will not be subject to import duties into the United States. It is now trying to finalize an agreement with Airbus for the European plane maker to take control of the C Series program. Airbus will throw all its marketing and procurement power behind the aircraft when the deal closes, improving its sale prospects, many observers say.
The stock has largely been on the upswing, with particular momentum in the past six months.
Still, Bombardier took a risk launching the latest offering. While it was advantageous for the company to raise money at a higher stock price, there is the possibility the action will create an overhang on the stock for a period of time. Shareholders have frequently punished companies across multiple sectors for being overly opportunistic with equity raises.
CEO Alain Bellemare is about halfway into a five-year effort to revive the company in which the manufacturer will move this year out of a multiyear, cash-intensive product investment cycle and into what it hopes will be a strong growth phase.
Bombardier has said it plans to use net proceeds from the offering to bolster its cash position and improve its balance sheet. The money raised gives the company more wiggle room to deal with any potential delay in the entry-into-service of its Global 7000 business jet and finance the C Series production increase. There's also an option to buy back the Caisse de dépôt et placement du Québec's minority stake in Bombardier's rail unit.
The last time Bombardier sold stock was 2015. And the circumstances were much different.
Faced with a declining share price and with investor confidence in management shredded, the company named Mr. Bellemare its new CEO and also halted its dividend in early February that year. A week later, the company announced its share sale.
With so much uncertainty around the company, Bombardier felt compelled to entice investors to buy the deal. To do so, it offered the new equity at a large discount (10 per cent) to the market price. It worked. The new shares were sold for $2.21 apiece, and the offering went quickly. However, buyers suffered. It took almost two full years from the equity financing for the stock price to recover to the offer price.
CLOSE: $3.68, DOWN 9¢