When he officially succeeds Alain Bellemare as CEO of Bombardier Inc. on Monday, Eric Martel will confront sobering questions about the future of a Quebec institution grappling with share-price lows, credit downgrades and a financial position some deem “unsustainable.”
The plane-and-train maker’s stock sunk to its lowest level in more than 25 years on Friday, closing at 40.5 cents.
The stock plunge came after Fitch Ratings last week cut its credit rating to CCC from CCC+ several days after the manufacturer suspended Canadian production due to the COVID-19 pandemic.
Standard & Poor’s has also lowered its rating for the company to CCC+ from B-, entrenching its junk status.
Meanwhile, 12,400 Bombardier employees remain on unpaid leave.
S&P said Bombardier’s “financial commitments appear unsustainable in the long term,” warning that the company may have to restructure its debt within 12 months.
The Montreal-based firm carries US$9.3 billion in debt despite multiple asset sales over the past five years. It will be reduced to a single revenue stream — business jets — after announcing the sale of its rail division to French train giant Alstom SA in February, just as demand for private planes falls away amid the broader economic slowdown triggered by the outbreak.
The sale once again shrank a company that a year ago boasted three major divisions _ commercial aircraft, trains and business jets.
“It’s not looking great. Just not looking great,” said Richard Aboulafia, an aviation analyst with Teal Group in the Washington, D.C., area.
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The collapse of oil prices around the globe could ripple out to Bombardier, he said, as large oil-producing companies and states pull back on expenditures like large-cabin private jets _ Bombardier’s Global 7500 lists for US$73 million.
Liquidity risks remain a “top-of-mind concern,” said Seth Seifman of J.P. Morgan.
While the ultra-long-range Global 7500 is sold out through 2022, Seifman lowered his forecast on business jet deliveries by more than 100 for the next two years — to 91 planes from 162 for 2020 and to 129 planes from 164 for 2021.
The deal is expected to close in the first half of 2021, if it can move through European Union regulatory hurdles.
Bombardier shored up its cash reserves with the sale of its remaining stake in the A220 commercial jetliner program to Airbus in February, netting US$531 million so far with US$60 million more expected as part of a bonus structure in the deal.
And it continues to work on closing the US$550-million divestiture of its CRJ region jet program to Mitsubishi and the US$500-million sale of its aerostructures business in Belfast and Morocco to Spirit AeroSystems, both of which were initially expected in the first half of 2020.
Bombardier’s price has sunk to roughly half its previous 25-year low in February 2016, raising questions about whether it will remain listed on the Toronto Stock Exchange.
TSX rules state that it may delist a company if “it appears that the public distribution, price, or trading activity of the securities has been so reduced as to make further dealings in the securities on TSX unwarranted.”
Asked about Bombardier’s status, spokeswoman Catherine Kee said in an email that “delistings are a result of a long-term process and careful consideration, they are not determined quickly.”
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