Canadian Manufacturing

Larger Bombardier CSeries set for first flight this month

Larger of two new CSeries aircraft set to begin test flights in Quebec before end of February after months-long delays

MONTREAL—After enduring weeks of questions about its future, Bombardier Inc. disclosed that its new equity offering has proven popular with investors and that the larger model of its new CSeries passenger jet is about a week away from a first test flight.

The first CS300 test plane is expected to take off from an airport in Mirabel, Que., north of Montreal, sometime between Feb. 26 and Feb. 28, depending on weather.

Bombardier has been focusing much of its resources on getting the CSeries launched following years of planning and development.

Last week, the company revised the program’s estimated cost to US$5.4 billion, up from US$4.23 billion a year ago, following a four-month delay in aircraft flight tests because of an engine failure.

The Montreal-based aerospace and rail equipment company said that it now expects to raise $938 million from an equity offering—up from the previous estimate of $750 million.

That total could rise to $1.08 billion if underwriters exercise an over-allotment option.

Under the deal, Bombardier will issue nearly 424.2 million subscription receipts at a price of C$2.21 each through a syndicate of underwriters.

The receipts will be exchanged for Bombardier’s class B shares after the financing gets shareholder approval next month.

The company also plans to raise about US$1.5 billion in debt and has suspended its dividend and shelved development of a new Learjet business jet to conserve cash.

Quebec’s economic development minister said the success of the equity offering demonstrates that there is no need for a government bailout.

“They are not in that kind of situation. Turbulence maybe, but no bailout,” Jacques Daoust told reporters.

Bombardier said it hasn’t asked for any financial help from government and said it has no plans to do so.

Daoust said he’s confident the CSeries will fly and sell.

The 120- to 160-seat aircraft is slated to enter into service in mid-2016, about six months after the smaller CS100, which seats 100 to 125.

The CS300 so far has 180 firm orders, while the CS100, which had its first test flight in September 2013, has 63.

Even with the success of Bombardier’s efforts to raise cash through equity sales, questions remain about its ability to launch the CSeries in the face of soft demand and stiff competition.

“The CSeries timeline is tight with high risk of the entry into service schedule slipping, further delaying potential improvement in cash flow and credit ratios and straining liquidity,” Evan Mann of Gimme Credit wrote in a report.

Mann expects Bombardier’s financial challenges to persist longer than anticipated, requiring the issuance of more debt.

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