Bombardier, currently burning cash as it boosts production of its now money-losing CSeries narrowbody jets, has priced its offering of US$1.4 billion senior notes at 8.75 per cent, as it raises funds to refinance some of its debt.
The Canadian aircraft maker in June signed a long-expected deal with Quebec for the province to invest $1bn in its CSeries aircraft programme, which has struggled with years of delays and cost overruns.
While the CSeries is only expected to break even in 2020, the company is also being squeezed as it seeks certification for its ultra long-range Global 7000 business jet.
The plane maker had no choice but to refinance at a higher rate to conserve cash for its aircraft programmes, an analyst who covers the company said.
“It was the only decision really,” said the analyst, who spoke on condition of anonymity.
“They’ll have to grin and bear it. It’s clearly a higher cost of debt that will go into the models,” he said.
Bombardier said it intends to use the net proceeds and cash on hand to redeem its outstanding 7.5 per cent senior notes due March 2018 and 5.5 per cent senior notes due September 2018.
The offering comes amid a sell-off in US Treasuries since Donald Trump was declared president-elect on November 8.
* Reuters
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