Bombardier rebounds as Citi says Quebec probe ‘appears routine’
MONTREAL Bombardier Inc. shares jumped the most in a year after a Citigroup analyst said Friday’s 20 per cent drop was excessive because a regulatory review of the company’s executive stock-sale plan “appears routine.”
Bombardier’s Class B stock jumped almost 24 per cent to close at $2.07 in Toronto, the biggest increase since last November. Bonds also rose, snapping a six-day decline.
Quebec’s Autorité des Marchés Financiers said late Thursday it was reviewing the company’s Automatic Securities Disposition Plan, which executives including chief executive Alain Bellemare can use to sell stock. The regulator ordered the suspension of all such transactions until further notice. Bombardier said it would fully co-operate with the probe of the stock-disposition plan, which was adopted in August.
“At this time, there appears to be no reason to believe that the regulator is looking into any alleged improprieties that are related to this program,” Citigroup analyst Stephen Trent said late Sunday in a note. As the investigation “appears routine,” last week’s selloff “looked unreasonable,” he said.
Bombardier shares lost 37 per cent of their value last week — the biggest decline since at least 1988, according to data compiled by Bloomberg.
Meanwhile, Standard & Poor’s analyst Alessio Di Francesco says Bombardier isn’t necessarily poised for a credit rating downgrade even after a revised cash-flow target sent its bonds plunging last week.
The fact that “we expect free cash flow to be negative this year, doesn’t mean that there will be a negative rating action,” Di Francesco said in a telephone interview.
“We do believe that this company has good prospects, I should say, for getting the free cash flow back.”
Bombardier’s bonds tumbled after the jet and railway-car maker revised its cash flow target, sold assets and cut 5,000 jobs to bolster its balance sheet.
Bombardier’s high-yield notes led declines among U.S. dollar issuers on Friday.
The company has been rated B- by S&P since a downgrade in September 2016. That rating was confirmed again a year ago. Since then, Bombardier has made strides to improve its credit profile with steps that included a partnership with Airbus SE over its C Series jet program, Di Francesco said.
“If we look at it from the starting point of this time last year when we published our report, there have been more positives than negatives,” he said.
Bombardier’s credit rating at S&P is six steps below investment grade, with a stable outlook. Di Francesco declined to say when Bombardier’s next rating review would be published. Bombardier is rated B3 at Moody’s Investors Service, also six notches below investment grade. Moody’s revised its outlook to stable from negative on Nov. 5.