Bombardier Shares, Bonds Drop on Business-Jet-Demand Doubts

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Bombardier Inc.’s shares and bonds tumbled on concern that demand is weakening for business jets, a pillar of profit at a company struggling to develop its first commercial airliner.

The sell-off probably was triggered by comments Wednesday from an aviation-parts supplier, B/E Aerospace Inc. about softening buyer interest in large-cabin executive aircraft, said Benoit Poirier, a Desjardins Securities Inc. analyst.

“They said the business-jet environment remains very tough, especially on the international front,” Poirier said in a telephone interview from Montreal, where Bombardier also is based. He recommends buying the stock.

Bombardier’s widely traded Class B shares sank 3.9 percent to C$1.72 at the close in Toronto, paring an earlier plunge of as much as 18 percent. The 6 percent bonds due October 2022 fell 4.8 percent to 79 cents on the dollar. They had traded above par value in January.

According to a Citigroup Inc. analyst, Bombardier executives also told bondholders on a call Wednesday that “talk of tapping the markets again is absolutely untrue” and that liquidity is not a concern for the company.

Call Described

“Overall, the tone of the call was neutral to incrementally positive,” Citigroup’s Manish Somaiya said in a note to clients, citing comments from Treasurer Andrew Baranowsky and Shirley Chenier, director of investor relations.

The forum was held to review the Paris Air Show and other public information, according to Isabelle Rondeau, a Bombardier spokeswoman. There is no replay number for the call, and “nothing special” was discussed, she said by e-mail.

Bombardier has been squeezed because of slow sales for the CSeries jetliner, its attempt to challenge the Boeing Co.-Airbus Group SE duopoly on single-aisle jets. The plane is also running more than two years late, making Bombardier’s business aircraft even more crucial.

The stock began plunging after B/E Chairman Amin Khoury told analysts during an earnings conference call that large-cabin private planes have “come under pressure” in markets such as China, Russia and Latin America as governments and energy companies cut spending. B/E makes aircraft interiors.

Large-cabin executive planes were the first to recover from the 2008-2009 recession as a commodities rally in emerging markets spurred sales, providing a bright spot for Bombardier. Now, the collapse of oil prices and a slump in metals such as copper and gold are crimping jet sales.

Bombardier on July 9 said it’s re-evaluating the production timeline for the Global 7000 and 8000, the company’s largest, longest-range business jets. In May, the company announced it would cut 1,750 jobs at the business jet unit.

Bombardier’s five-year credit-default swap contracts jumped 14 percent to a record high of 818 basis points, signaling a deterioration in creditworthiness perception.

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