Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Although Ottawa has lauded the C Series plane and called Bombardier an anchor company for Canada’s aerospace industry, it has expressed reservations about its executive structure.

Ryan Remiorz/The Canadian Press

Bombardier Inc. raised $1.4-billion (U.S.) in its first return to the bond market in 21 months, refinancing some debt and buying more time for its turnaround plan.

The Montreal-based plane and train maker is tapping the bond market for the first time since February, 2015, in an offering led by Bank of America Merrill Lynch.

Proceeds of the sale, which carries a costly interest coupon of 8.75 per cent per year, will be used to pay off the entirety of two sets of senior notes due in 2018, the company said Wednesday. Those existing notes had coupons of 7.5 per cent and 5.5 per cent.

Story continues below advertisement

"They're getting rid of the pressure" by taking out all the debt due in 2018, said one analyst who asked not to be named. "They need to not constantly have a noose around their neck."

Bombardier initially planned to issue between $700-million and $800-million of debt, one source familiar with the company's plans said. But investor interest Tuesday and early Wednesday was so strong that it easily pushed past that target. The new debt is due in 2021.

Prospects for the company's train division, known as Bombardier Transportation, was among the elements that sparked market interest, the person said. "The company is positioning itself more and more like an infrastructure play," particularly in the U.S. and Canada, where infrastructure spending is expected to grow significantly in years ahead.

The price of the coupon, the company's early success with its turnaround plan, and the fact that the Quebec government has shown a willingness to backstop the company in times of crisis also helped, said observers.

"The government's backing definitely provides comfort," said Anthony Scilipoti of Veritas Investment Research.

Bombardier is going to the market earlier than expected. But management might believe it's better to take its chances now, with its turnaround gaining steam, than next year, when the 2018 maturities will loom closer.

"It's early but they're known to be opportunistic," said AltaCorp analyst Chris Murray, adding the selection of Donald Trump as president-elect of the United States is wreaking havoc on the bond market generally. The infrastructure spending and tax cuts Mr. Trump has pledged are expected to push growth higher but also result in higher government debt and inflation.

Story continues below advertisement

Refinancing the 2018 maturities has always been part of, and marks the end of the de-risking phase, of Bombardier's recovery plan, said company spokesman Mike Nadolski.

"It was the right time for us to access the market given that our turn-around plan is in full motion, with solid program execution, strong 3Q results and increased guidance. With the refinancing successfully behind us we are focused on rebuilding earnings and cash generation."

The other bookrunners on the deal are BNP Paribas, Citigroup Inc., Crédit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc., J.P. Morgan Securities Canada Inc., National Bank of Canada and UBS, according to LevFin Insights LLC, a New York-based information service focused on the leveraged loan and high yield bond markets.

The sale comes as Bombardier chief executive Alain Bellemare makes headway on his turnaround plan for the manufacturer, which was flirting with bankruptcy protection last year as it struggled with a cash crunch and high cost structure.

The company has since shored up that liquidity; it had about $4.45-billion in available short-term capital resources at the end of September. It has also reduced risk by focusing its program development efforts on its new C Series airliner. The aircraft, two years late to market and $2-billion over budget, is the first clean-sheet design of a single-aisle airliner in nearly 30 years.

The company's third quarter ended Sept. 30 marked the third-straight quarter it has generated margins on earnings before interest and taxes, excluding special items, topping 6 per cent in each of its business units.

Story continues below advertisement

Bombardier continues to seek a $1-billion investment from the Canadian government, but it remains unclear if and when an agreement might be reached. Job levels in Canada are a one of the main discussion points in the talks, sources have said.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies