Bombardier has launched consent solicitations with respect to its outstanding senior notes or debentures following claims by bondholders that the company has breached covenants through the sale of its non-core assets.
On April 22, 2021, Bombardier received a letter from counsel to a holder of 2034 Notes, claiming that the Corporation’s divestitures of non-core assets, including its transportation business, regional jet program and aerostructures division, constitute a breach of certain covenants under the indenture governing the 2034 Notes.
Bombardier states that it believes the allegations are “without merit” and that it has not breached any covenant under the indenture. Bombardier adds that it also believes the actions it has taken enabled it to “reposition the business, strengthen its balance sheet, accelerate de-leveraging and better position Bombardier for long term growth and value creation”.
The Consent Solicitations relate to number of series of Bombardier’s outstanding senior notes or debentures: 5.750% Senior Notes due 2022, 6.000% Senior Notes due 2022, 6.125% Senior Notes due 2023, 7.500% Senior Notes due 2024, 7.500% Senior Notes due 2025, 7.35% Debentures due 2026, 7.875% Senior Notes due 2027, and 7.450% Senior Notes due 2034.
Bombardier is seeking consents from its noteholders to make amendments to clarify that the sale of the non-core assets is “permitted by the applicable indenture and do not and will not give rise to any defaults, events of default or change of control under the applicable indenture”.
Each Consent Solicitation requires consent from holders representing the requisite majority of the outstanding aggregate principal amount of such series of notes. If the requisite consents from holders of a series of notes are received and the proposed amendments are adopted and become operative, Bombardier will make a number of consent payments. However, the company again states that it “vigorously denies that any alleged default has occurred” and that the issued press release in no way suggests any admission of liability, obligation, wrongdoing or violation of law.
Global Bondholder Services Corporation is acting as the US Information and Tabulation Agent for the Consent Solicitations, and Kingsdale Partners is acting as the Canadian Information and Tabulation Agent for the Consent Solicitation for the C$ Notes.
Citigroup and UBS are the Solicitation Agents for the Consent Solicitation.
Meanwhile, Bombardier has announced its expected first quarter operating results.
Business jet revenues are expected to be $1.3 billion, an increase of 18% year-over-year, with EBIT and adjusted EBITDA from continuing operations are expected to be $19 million and $123 million, respectively.
Bombardier expected pro-forma liquidity of $2.6 billion remaining after ~$2.4 billion expected to be deployed toward balance sheet deleveraging year-to-date.
Business aircraft deliveries for the first quarter expected to be 26 units.
Bombardier states that it remains on track to deliver an expected 110-120 business aircrafts in 2021.
“The preliminary financial results we are sharing today validate the actions we have taken to reposition our business and reflect the progress we are making on our strategic priorities,” said Éric Martel, President and Chief Executive Officer of Bombardier. “The first quarter was a strong start to the year, with our cost reduction initiatives beginning to contribute to the bottom line, continued progress of our Global 7500 learning curve and robust demand supporting significant year-over-year margin expansion. Looking ahead, our markets are continuing to show signs of improvement and our plans and financial performance for the year remain on track.”