Quebec pension fund buys $1.5B stake in Bombardier rail
By
Vanessa LuBusiness reporter
Thu., Nov. 19, 2015
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The investment by Caisse comes on the heels of a $1 billion (U.S.) commitment from the Quebec government for a 49.5 per cent stake in Bombardier’s struggling CSeries program.
Development of the CSeries program is years behind schedule and billions over budget, but the flight testing is now complete. The company expects certification soon.
However, sales for the all-new plane, in two sizes, have been sluggish with only 243 firm orders to date – and none in a year.
Porter Airlines, which has placed a conditional order for 12 planes, and options for another 18, will not be allowed to fly the jets from Toronto’s island airport, now that the Liberals have taken power in Ottawa.
As Bombardier has burned through cash to get the CSeries launched, it has had to make substantial job cuts and shelved plans for the Learjet85. Earlier this year, Bombardier raised $3 billion (U.S.) through a debt and equity offering.
With the Quebec investment and the deal with Caisse, which is scheduled to close in the first quarter of 2016, Bombardier estimates it will have access to $6 billion (U.S.) in cash and cash equivalents by year’s end.
As a condition of the Caisse deal, Bombardier must ensure there is always $1.25 billion (U.S.) in liquidity. Sabia said the Caisse never considered investing in the CSeries program, choosing instead in the train division.
Bombardier’s CEO Alain Bellemare, who took over from Pierre Beaudoin in February, says the company has plenty of cash to complete all its programs including the CSeries jet and new Global 7000/8000 business jets.
It also provides a cushion in case market conditions prove difficult, Bellemare told reporters on Thursday. “We now have ‘a safety net,’” he said. “We will also re-establish confidence with our clients which is key if we want to continue selling our products.”
On the third-quarter conference call in October, Bellemare said an additional $2 billion (U.S.) investment would be needed for the CSeries program in the coming years, given it is not expected to get to profitability before 2020 or 2021. [...]