Bombardier speeds dismemberment with A220 deal

Bloomberg

Bombardier Inc, which once made everything from snowmobiles to commercial jets, is poised to become a shadow of its former self as the Canadian manufacturer accelerates asset sales to reduce debt.
The company is completing its exit from commercial aerospace with the sale of its stake in the Airbus SE A220 program, once known as the C Series, to the European planemaker.
Bombardier said in a statement it is also pursuing other “strategic options to accelerate deleveraging.” The company is near a deal to sell its rail-equipment unit to Alstom SA, Bloomberg News reported.
“The C Series was a cash drain,” Bombardier Chief Executive Officer Alain Bellemare, said in a call with analysts. “The strategy was always to exit commercial aircraft while protecting jobs. We’ve done that in a very responsible matter. We are now with two very strong businesses and we are continuing to look at our options to see if we can continue deleveraging.”
The dismembering positions Montreal-based Bombardier to retain only its private-jet division — while giving it a path to taming a $10 billion debt load.
But for all its financial soundness, Bombardier’s exit from its marquee project marks the end of ambitious plans that once were a source of pride in the largely francophone province. The A220 won praise for fuel-efficient engines, composite wings and an airy cabin featuring large windows. But the plane ran more than two years late and about $2 billion over budget, and had trouble attracting buyers in an industry dominated by Airbus and Boeing Co.
And there’s likely more divestitures to come. Alstom and Bombardier could reach an agreement soon, though talks could still be delayed or fall apart, according to people familiar with the matter. Alstom could pay about $7.6 billion for the rail business, Handelsblatt reported earlier, without saying where it got the information. Bombardier is also exploring the sale of its corporate-jet operation to Textron Inc, maker of Cessna planes, the Wall Street Journal reported.
The Montreal-based company sold its turboprop-plane business to Longview Aviation Capital Corp last year, and has agreements in place to offload its regional-jet operation and a wing plant in Northern Ireland. Those deals are on track to close in the first half of 2020, the company said in a statement as it reported a loss in line with expectations.
Airbus is paying $591 million to Bombardier to raise its stake to 75%. That, combined with the other aerospace divestitures, will bring in more than $1.6 billion in cash and eliminate almost $2 billion in liabilities, according to the statement.
Bombardier is seeking to reduce its debt to about $4 billion by the end of this year, chief financial officer John Di Bert said.
With positive free cash flow and the A220 divestiture, there are some positive elements
for this “show me” story, Stephen Trent and Brian Roberts, analysts at Citigroup Global Markets, said.