Bombardier shares tumble on $638.4M share sale

Proceeds will be used to supplement working capital and for general corporate purposes, “thereby building further operational flexibility and re-equitizing the balance sheet,” the company said. The Montreal-based company has said it’s “well-positioned” to break even on a cash-flow basis this year — a major milestone for Bellemare’s turnaround plan.

Options for Bellemare and his team include buying back the Caisse de Dépôt et Placement du Québec’s minority stake in Bombardier’s rail unit after this year, Cai von Rumohr, a Cowen & Co. analyst, said in a note to clients. The Caisse, Canada’s No. 2 pension-fund manager, owns about 28.5 per cent of the unit.

Bombardier last sold stock in 2015 when it issued $1.1-billion of Class B shares a few days after appointing Bellemare as CEO.

Credit Suisse Securities, National Bank Financial, UBS Securities Canada and TD Securities are leading the stock sale. The underwriters have an option to purchase another 25.2 million shares at any time up to 30 days after closing of the offering. That would increase total proceeds to $734 million.

Meanwhile, the procurement chief for Airbus said the European planemaker will need to increase sales of Bombardier’s CSeries jets to cut production costs, Reuters reports. Last year, Airbus agreed to take a majority stake in Bombardier’s CSeries jetliner program, which had not secured a new order for the 110-130 seat plane in the 18 months before the deal.

Their partnership is awaiting regulatory approval and both Bombardier and Airbus have expressed optimism over the CSeries’ long-term sales prospects.

“First we’re going to have to sell the aircraft, in order to then work with suppliers on costs of the program, because at the moment there is a gap,” Klauss Richter told Reuters at Airbus’ headquarters in Toulouse, France.

“An increase in (the) productivity rate will help,” he said.

In November, EgyptAir signed an initial order for 12 CSeries jets and Bombardier also received an order for 31 planes from an undisclosed European buyer, marking an end to its sales drought.

Quebec’s Premier Philippe Couillard, also speaking to reporters at Airbus’s Toulouse headquarters, said approval from the regulators was the final hurdle standing in the way of a viable future for the CSeries.