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Bombardier chief steps down, divestitures possible

A reshuffled leadership team has outlined a three-point plan for shoring up Bombardier’s finances as CSeries development continues, and has opened the door to selling more of the company’s businesses.

Alain Bellemare will complete a leadership change launched last August by replacing Pierre Beaudoin as chief executive. Beaudoin is moving to become corporate chairman and replacing his father and 50-year veteran, Laurent, who will remain on the board of directors as chairman emeritus.

The sea change on the leadership team comes as analysts warn that Bombardier faces a financial crisis, with only $2.4 billion in cash and a $750 million bond covenant coming due in January. Ratings agencies Fitch and Moody’s have warned that the company’s credit rating could be downgraded to junk status if the cash balance falls below $2 billion.

Since last January, Bombardier has raised cash by making relatively small divestitures, such as selling off the Flexjet fractional business jet service and, more recently, a military training and simulation unit.

But it appears that the company is now looking at making bolder moves to raise cash. First, it will issue new shares worth $600 million, if a 66.6% majority of shareholders approve the plan at a special meeting in March. Beaudoin family members control about 58% of the company’s shares and already approve the plan, the company says.

The next step seeks to raise up to $1.5 billion in loans. Although some analysts are sceptical that banks would be willing to offer loans on favourable terms, Bombardier officials are optimistic the debt can be issued successfully.

The final element in the financing plan could be the most dramatic. Bombardier could “participate in industry consolidation”, said Pierre Beaudoin, during a 12 February earnings call. What that means is unclear. Beaudoin says the phrase opens the door to both acquisitions and divestitures, but he also acknowledges that the company’s overall goal is to reduce debt rather than spend money.

Last August, Bombardier dissolved its Aerospace division and created three standalone units for commercial aircraft, business jets and aerostructures and engineering services.

The new financing plan also follows Bombardier’s decision to pause the Learjet 85 in January and accept a $1.3 billion impairment charge.

Meanwhile, Bombardier has completed about 1,000 flight hours on the CSeries test programme. That amounts to about 40% of the 2,400h planned when it launched flight testing in September 2013. The first CS300 is within a “few weeks” of first flight and the last of five CS100 test aircraft will be handed over to the flight test team in the first quarter, Beaudoin says.

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