Bombardier Surges on Report Quebec to Provide Financial Aidby
La Presse says assistance package to be announced Thursday
Rescue would ease investors' concern, Desjardins' Poirier says
Bombardier Inc. rose after a Montreal newspaper reported that Quebec’s government will provide financial assistance to the embattled maker of the CSeries jetliner.
The province will announce an unspecified aid package on Thursday, La Presse newspaper reported, without identifying the source of the information. The government had no immediate comment, while Bombardier spokeswoman Isabelle Rondeau, the spokeswoman, declined to comment via e-mail.
Government involvement probably would assuage “the current concerns on the Street about the company’s balance sheet,” Benoit Poirier, a Desjardins Securities Inc. analyst, said in a note. Net proceeds for Bombardier could amount to as much as $2 billion, he said.
A Quebec rescue would follow through on a pledge made last month by Premier Philippe Couillard, who said Bombardier was a “huge asset” worthy of support because the Montreal-based planemaker plays a central role in the provincial aerospace industry. “If they need something we will be ready to help them,” Couillard said in a Sept. 29 Bloomberg interview.
The widely traded Class B shares climbed 11 percent to C$1.61 at the close in Toronto. The gain trimmed this year’s decline to 61 percent.
Bombardier has been draining cash while it develops the CSeries, its largest-ever model. The jet is running more than two years late and $2 billion over budget, and slow sales have increased the financial strain on the company. Bombardier is scheduled to report third-quarter earnings on Thursday.
A “likely” scenario for Bombardier assistance is direct participation from Caisse de Depot et Placement du Quebec or the provincial government in the company’s rail unit, which would result in short-term cash proceeds without the need for a planned initial public offering, Poirier said.
Financial aid could also take the shape of a financing plan to customers “that would ensure the long-term viability of the program and as a result likely spark some CSeries orders,” Poirier said.