Simulator manufacturer cancels private placement after failing to secure favourable terms

Canadian simulation and training company CAE has cancelled a planned C$150-185 million ($100-125 million) private placement, saying the available terms would have hurt shareholders. The placement was withdrawn within 24h of its announcement after CAE's share price tumbled 20%.

CAE wants to reduce almost C$1 billion of debt built by the rapid expansion of its civil flight training initiative, launched to reduce the company's dependence on declining commercial flight simulator sales. In the first nine months of its 2002-3 financial year, training generated almost half the total sales of CAE's civil unit.

The Canadian company cancelled a C$235 million cross-border equity offering in July last year, citing weak market conditions. Instead, the company has been raising finances by the sale and leaseback of simulators built for its civil flight training centres, with plans to raise another $100 million next year via the same route.

CAE is looking to its military business to offset the civil downturn, and chief executive Derek Burney has criticised the Canadian government for not supporting the USA and UK in the Iraqi crisis, arguing it could cost sales. Canada's two major defence customers are the USA and UK, and "politics is never too far removed from defence contracts, so even being the best is sometimes not good enough", he says.

On the civil side, Airbus has purchased 20 CAE Simfinity maintenance/flight training devices for the A320,A330 and A340 families. The devices, to be deployed in Airbus training centres in Beijing, Miami and Toulouse, have a list price of almost C$20 million.

In August last year CAE and Airbus signed a 10-year agreement under which they operate their training centres as a global network of 23 full-flight simulators (14 CAE and nine Airbus) in 10 locations (eight CAE and two Airbus). In an example of the co-operation, JetBlue Airways this month signed a three-year, C$28 million deal to train at Airbus's Miami centre and acquire three CAE Simfinity A320 flight training devices. CAE owns two A320 simulators at Miami, and shares revenues from the centre with Airbus.

Source: Flight International