15-year pay­back for fed­eral loan

Bombardier also given two-year grace pe­riod for $372.5 mil­lion owed

The Hamilton Spectator - - BUSINESS - ROSS MAROWITS

MON­TREAL — It will take 15 years for Bombardier to re­pay the $372.5-mil­lion loan it is re­ceiv­ing from the fed­eral gov­ern­ment, says its chief fi­nan­cial of­fi­cer.

Dur­ing a quar­terly earn­ings con­fer­ence call Thurs­day, John Di Bert shed light on the terms of the fed­eral as­sis­tance pack­age an­nounced last week for the Mon­treal-based aerospace gi­ant, in­clud­ing how long it has to re­pay the money.

“It will be over a sig­nif­i­cant amount of time, the pro­gram length about 15 years, in­clud­ing a bit of a grace pe­riod the first two years, so no re­pay­ments the first two years,” Di Bert said.

The com­pany ex­pects to re­ceive the money in in­stal­ments over four years, with any­where be­tween $70 mil­lion and $100 mil­lion flow­ing to Bombardier an­nu­ally.

The in­ter­est-free loan is to sup­port Bombardier’s Global 7000 busi­ness jet and CSeries pas­sen­ger air­craft projects. Un­der the ar­range­ment, Bombardier will re­pay Ottawa based on roy­al­ties for the num­ber of CSeries sold and rev­enues gen­er­ated from the Global 7000. About two-thirds of the loan is set aside for the Global 7000s, with the rest de­voted to the CSeries.

The aid to Bombardier has been the sub­ject of pub­lic crit­i­cism, but the fed­eral gov­ern­ment and the com­pany have both de­fended its mer­its, say­ing it’s needed to pre­serve jobs and com­pete glob­ally.

Brazil has filed a com­plaint be­fore the World Trade Or­ga­ni­za­tion, ac­cus­ing Canada of un­fairly sub­si­diz­ing Bombardier, an al­le­ga­tion both the com­pany and the fed­eral gov­ern­ment re­ject.

Bombardier ex­pects to be­gin pay­ing roy­al­ties in April from a $350-mil­lion fed­eral loan it re­ceived in 2008 to de­velop the CSeries. The ini­tial pay­ments are based on seven CSeries planes de­liv­ered last year.

The com­pany ex­pects to de­liver 30 to 35 CSeries air­craft this year. Most of the de­liv­er­ies will come to­ward the end of the year as Pratt & Whit­ney re­solves prob­lems build­ing en­gines that re­duced CSeries de­liv­er­ies last year.

Bombardier is in the midst of a five-year turn­around plan that has in­volved mass lay­offs. Ear­lier Thurs­day, it re­ported 2016 yearend losses of $981 mil­lion US, down from $5.34 bil­lion US in 2015. Full-year rev­enue — re­ported in U.S. cur­rency — fell by $1.8 bil­lion from 2015 to $16.34 bil­lion last year.

CEO Alain Belle­mare said lessons learned from de­vel­op­ing the 100- to 160-seat CSeries, which in­curred de­lays and cost over­runs, are be­ing taken into ac­count as Bombardier builds the Global 7000, its largest busi­ness jet, sched­uled to en­ter ser­vice late next year. “Like any new pro­gram, we will have some hic­cups and some is­sues along the way,” he said on the con­fer­ence call. “But right now we’re not see­ing any­thing that is ab­nor­mal.”

PAUL CHIASSON, THE CANA­DIAN PRESS

A $981-mil­lion US net loss in 2016 is down from $5.34 bil­lion a year ear­lier.

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