Canadian Manufacturing

Bombardier expecting Q1 revenues to increase 18%; faces accusation from debt holder

Bombardier said it received a letter on April 22 in which the holder of debt maturing in 2034 alleges the company's various assets sales constitute a breach of covenants.

May 3, 2021  The Canadian Press

Bombardier is expecting to generate higher revenues in the first quarter while the aircraft manufacturer faces an allegation that it breached debt covenants by selling its railway and commercial aircraft businesses.

The Montreal-based maker of business jets released preliminary results that expect revenues to increase 18 per cent from a year ago to US$1.3 billion. Full results will be released on May 6 at its annual meeting.

Bombardier also says it expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of US$123 million and free cash flow usage from continuing operations of US$405 million.

Bombardier CEO Eric Martel said the preliminary results validate the actions the company has taken to reposition its business and reflects the progress it has made.

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“Looking ahead, our markets are continuing to show signs of improvement and our plans and financial performance for the year remain on track,” Martel said.

Bombardier said it received a letter on April 22 in which the holder of debt maturing in 2034 alleges the company’s various assets sales constitute a breach of covenants.

The company said the allegation is “without merit” and the assets sales will allow it to reduce debt and improve its financial results.

Nonetheless, the Quebec aircraft manufacturer has decided to seek the consent of the holders of other debt securities for amendments to clarify that the asset disposals are permitted.

“With the assistance of external advisers, the corporation evaluated a range of options and determined that initiating the consent solicitations is the most expedient and efficient path to maintain value and protect the corporation and its stakeholders,” Bombardier said in a news release.

Industry analyst Walter Spracklin of RBC Dominion Securities says the bondholder claim, which represents just 2.5 per cent of Bombardier’s interest bearing debt, may be a “moderate overhang on the shares in the near-term.”

For the quarter ended March 31, Bombardier expects to have delivered 26 business jets, the same amount as a year ago. The company still expects between 110 and 120 deliveries for the year.

Spracklin said the financial results suggest that Bombardier looks to be on track to deliver on the goals laid out at its recent investor day.