Bombardier Inc. Gets Quebec Financing

Bombardier Inc. has had some recent finance problems with their aerospace division and is using its rail division as collateral so to speak.

They better make money nowAi??because if they don’t perform the CDPQ will own 42.5 % after 5 years.

What does it mean for us on the West coast? Definitely more pressure to buy more SkyTrain cars, meaning more pressure to build more SkyTrain. A sort of use it or lose it proposition.

Bombardier and CDPQ Enter Into Definitive Agreement: CDPQ to Acquire 30% of Newly-Created BT Holdco for $1.5B

Source: Bombardier Transportation Nov 19, 2015

Bombardierannounced it has entered into a definitive agreement with CDPQ for a $1.5 billion convertible share investment in Bombardier Transportation’sAi??newly-created holding company, Bombardier Transportation (Investment) UK Ltd (“BT Holdco”). Under the terms of the agreement, CDPQ will acquire shares of BT Holdco convertible into a 30% common equity stake of BT Holdco, subject to annual adjustments related to performance. The transaction will be executed through a private placement and values Bombardier Transportation at $5 billion. The investment has been approved by the Boards of Directors of Bombardier and CDPQ.

Continued……

 

Comments

One Response to “Bombardier Inc. Gets Quebec Financing”
  1. Haveacow says:

    Most of Bombardier’s Aerospace’s problems resulted from a simple miscalculation about their C Series Jet. The C series jet is not a commuter airliner, Bombarider’s aerospace’s bread and butter, it is essentially a first dive into the medium and long haul airliner business. An industry dominated by Boeing and Airbus and for good reasons. The assumption was basically this that, they could by taking a commuter airliner design stretch it out and build a small to medium sized long haul airliner. When you build an aircraft its development costs are soaked up by the builder into the purchase cost of every single aircraft they sell The more aircraft they sell the cheaper the aircraft becomes. Bombardier expected that, they could take a commuter ranged aircraft development project and stretch the program into a small airline development program for about 50-75% more than the equivalent commuter aircraft development project, matching the increase in the size and range of the aircrfat. They were wrong!

    What was originally planned to be a $5-6 Billion development became a $11 Billion development program. They now understand why so few aircraft companies want to challenge Boeing or Air Bus, very few can afford the major costs to develop these classes of aircraft. The development cost of even a small to medium sized airliner is actually much higher than a commuter aircraft based on size of the aircraft. Yes, you can increase the size and capacity of a commuter airline by 50-70% and create a short to medium ranged long haul airliner. However, due to regulations, fuel capacities and the sheer complexity of longer distance airliners you can’t do it by simply increasing the size of a development program 50-70%, Bombardier thought they could. A friend told me that once you make a decision to cross into that market your development costs can double, even triple. He once heard a executive at Boeing say, “if you are building a small to medium sized airliner you have to be ready to spend $12-20 Billion to develop it!” That’s why when smaller aircraft production companies claim they are about enter this market companies like Boeing and Air Bus don’t pay attention initially because they have seen so many companies go under because of the realities of the process.

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