Another Taxpayer-Funded Bailout, This Time For A Canadian Private Jet Maker

Tyler Durden's picture

Once more in this new normal in which we 'live', the necessary creative destruction of capitalism is eschewed in favor of saving a zombie company that the CEO admitted was "overwhelmed." The good news for American taxpayers is that it is Canadian taxpayers - via a generous $1.3 billion 'investment' by the Quebec government - that are bailing out private-jet-maker Bombardier. Following aircraft projects plagued by overruns, missed deadlines, and scant interest from airlines, Bombardier posted a $4.9billion loss in Q3. Well never mind that, Quebec taxpayers now own 49.5% of the challenged CSeries program.

As Bloomberg reports, Bombardier Inc. will get a Quebec government rescue of as much as $1.3 billion as the struggling planemaker prepares to pump in even more cash into the tardy, over-budget CSeries jetliner.

Quebec will take an equity stake in Bombardier and invest $1 billion into the CSeries, which will need an additional $2 billion in spending during the next five years. The company also posted a $4.9 billion third-quarter loss Thursday and said it’s close to the sale of a minority stake in its train unit to unidentified investors.

 

Bombardier used $816 million of free cash flow in the quarter, exceeding the $551 million average of five analysts’ estimates compiled by Bloomberg. The figure is more than double the $368 million used in the same period last year.

 

Quebec agreed to buy 49.5 percent of the CSeries program. The province also is poised to become the largest holder of the Class B stock, with warrants to purchase as many as 200 million shares for C$2.21 each. That would be 37 percent more than Wednesday’s closing price -- which already reflected a 61 percent plunge this year, the worst performance among Canadian industrial companies.

The province’s rescue and Bombardier’s disclosures underscored the sweeping financial strain from an aircraft plagued by overruns, missed deadlines and scant interest from major airlines. With Bombardier also reeling from setbacks with two new business jets, analysts used a conference call with management to demand answers to a basic question: How did things get so bad?

“The organization was overwhelmed by the number of programs,” Chief Executive Officer Alain Bellemare, who took over in February, said on the call. “We had multiple programs running in parallel, and that was very challenging for an organization of our size.”

In exchange for the investment, Bombardier agreed to keep the headquarters of the CSeries partnership -- as well as a variety of activities, including manufacturing -- in the province for 20 years.

So far it has done little to assuage equity investors' fears...

 

And Bombardier CDS implies a 60% probability of default (given standard recovery assumptions).

As Fadi Chamoun, a BMO Capital Markets analyst, notes...

“This partnership and liquidity injection from the Quebec government helps but does not fully resolve the liquidity issue and the high financial leverage burden,

 

Bombardier “still needs to sell assets to fund capital requirements over the next two years and deliver a credible strategy to improve the profitability if the business aircraft and transportation divisions.”

*  *  *

Thank you Quebec taxpayers...

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Chandos's picture

Great! We really needed our own GM....Government Motors

Stuck on Zero's picture

Bernie would be so proud of the Canadians.

mtl4's picture

Bernie would be so proud of Quebecers.

 

There, fixed it for you!

 

rejected's picture

At some point in time the banks and government will own it all!

After all,,, that's the purpose of a central bank. No?

Oh, yea,,, the central bank is supposed to be the last chance savior of its banks and banking system. Sure.............

And the USA federal government amended the Federal Reserve Charter (lol) to allow them to do what?

Well,,, to buy treasuries and fund WWI, that's what.

Of course they passed a debt limit to keep them from getting too far in debt and that has worked out real well, hasn't it!

Doesn't matter which central bank,,, their all rubbish with the intent to own the world......... and us.

And so far they're right on track.

Remember to vote,,, your vote counts!

and other bullshit.

 

wmbz's picture

"Thank you Quebec taxpayers"...

None of the serf taxpayerS in Canada will get to fly on any of the jets that they are paying for.

Now back to work because we will need more money soon.

Thanks suckers...

Signed... Bombardier

 

P.S. Welcome to the never ending bailout club....

Handful of Dust's picture

But they should send every taxpayer a free jet ski, right?

Anopheles's picture

Wrong company.    Seadoos are part of BRP (Bombardier Recreational Products), they split off a decade ago. 

SILVERGEDDON's picture

Shoulda put the giant sized Tim Horton coffee cup holders in from the get go.

Plane woulda sold like hotcakes.

Conax's picture

Whoda thought a company named for a man that drops explosives from the skies might not get those airliner contracts.

Maybe they should name it "Mountain Auger Aviation".

larz's picture

This one makes alot of sense most tax payers need their own jet    I get it    this place is getting very silly          it needs a reset yesterday

NoPension's picture

They need a " cash for clunker jets" program.

You can trade in you old jet ( drag it, fly it, crash it, or drive it in, we don't care!"
And trade it in for a New Bombardier Jet. Room for the kids and the dog.
As an added benefit, our new Jets are more fuel efficient, so you will be doing your part to minimize that carbon footprint.

And we are building them HERE, for at least 20 years. Look at all the Jet Jobs and tax revenue the city will benefit from. And Jet Jobs are good, high paying jobs. The trickle down will be phenomenal . Almost too hard to calculate!

" Come on down to Jimmy's Jets. Trade that old clunker in for a new Bombardier. We finance. We take cash. Buy here, pay here!"

I_rikey_lice's picture

lol "Quebec Taxpayers"

hmmmm's picture

The proper name is Investissement Québec and they don't do helpless cases, they look at the benefit (amount of money the government rapes from the Company and its employees in taxes -- which is almost always more than the amount lent) derived and the risk associated.  Most Companies pay back fine, most ask for extensions but pay back, and a few go bankrupt (not many). Investissement Québec does sound prudent risk-reward analysis. Look at in the USA at when the airlines go cap in hand for a bailout and a congressional comittee asks "You airlines are asking for $15B bailout, how much dis you all pay in taxes last year?" Answer "31B" -- gee I wonder why they need money? Its a two way street when you rape the Corporations for funds and they ask for a loan. This is not a bailout, its an investment and it will be paid back and in the interim Billions in employee taxes are recouped by the Quebec government. The condition is they keep the operation in Quebec and pay it back; double reward for the tax payer in this case. It's not like a solar company or some poop, this is a diversified giant that makes trains, and planes, and all sorts of stuff. This was sensationalaized ZH and distorted imo, but I do enjoy ZH for the most part.

ZerOhead's picture

Bombardier is having major problems in several divisions so let's hope they use the funds to straighten their shit out

Even it's made in Canada streetcars that are actually made in Mexico are turning out to be giant turds...

http://www.thestar.com/news/gta/2015/10/28/ttc-will-sue-bombardier-over-...

 

 

bluskyes's picture

I would agree if the feds weren't providing "equalization payments" to maintain the socialist paradise, and make sure that nobody had more than their fair share of success.

In.Sip.ient's picture

What y'all might of missed.

The Trudeau LPC has this infrastructure thingy with

lots of public transportation infrastructure spending/upgrades.

 

Now take a wild guess which Montreal based company

makes various "public transportation" items... don't

think toooo hard... it ain't no trick question.

 

That's right, y'all voted for another corporate

bailout.  Hey, harper did GMC, so obviously

why not a Montreal based corporation... Hmmm?

 

File under;

Your Money

Their Friends

 

...part 2...

 

robertocarlos's picture

It's Quebec. We have to pay to keep the country together. If we broke up we'd be using barter and some sort of relic to conduct business transactions.

Five8Charlie's picture

Or something even more barbarous.

SILVERGEDDON's picture

When i lived in Montreal, I practiced multiculturalism in exchange for beaver. I pounded on many, even shaved a few. it was a great city to be young in. And, the girls were for the most part well dressed and smokin' hot naturals - no plastic, no make up, and no inhibitions either. La joie de vivre !

Abbie Normal's picture

They're like the failure-to-launch adult child that still lives in the basement; always threatening to leave but never doing so as long as they get their allowance.  Quebec-based govt-subsidized planes, trains and bus manufacturers that haven't made a profit in forever.

Lumberjack's picture

It still is a great company and I would invest in them. A couple others would be CanAm and Manac.

Lumberjack's picture

I See the downvotes as those who would prefer to bring "democracy" to another almost sovereign nation.

Johnny Horscaulk's picture
Johnny Horscaulk (not verified) Oct 29, 2015 3:40 PM

Think they make more than jets

http://www.cbc.ca/news/canada/montreal/bombardier-bailout-raises-ire-of-...

bad idea jeans maybe - maybe not - but Canadians should be more concerned with the 'Comer Case'

http://www.socred.org/index.php/blogs/view/the-case-to-reinstate-the-ban...

remember that?

You are forgiven if you don't - the lack of coverage has surprised even me.

MarkGoldman's picture

Bombardier sucks, today it is mostly taxpayer blood. Tomorrow, they will be back to just sucking again.

Lostinfortwalton's picture

They make the CRJ Regional Jet which has been an outstanding airplane used by commuter airlines. It often flys higher than faster than some larger passenger jets, such as the Boeing 737. They also make the Challenger corporate jet which is similar to the CRJ. In addition they own Learjet, in Wichita, Kansas, which has been on it's deathbed for years. The main problem seems to be with the new commuter airplane which is basically smallish 737. I think they are just housecleaning the books to get a fresh start; I doubt if the real loss is this bad.

Five8Charlie's picture

Probably worse. They are going up against both Airbus and Boeing (Read: The EU and the USA.) with their new aircraft.  Bombardier will be crushed like a bug.

And no, CRJs are not able to fly higher than Boeing 737s or Airbus A320s. Designing that capability into a small, short range jet would be ... nonsense. Don't believe everything you read on Wikipedia.

all-priced-in's picture

 Bombardier needs to increase the pay rate of its employees so they can afford to buy the company's product -

 

 

 

Don't they have unions up there in Canada - how about some fair treatment for employees!

 

 

;-)

 

 

 

Nobody For President's picture

Yep, the CRJ is a good airplane, as is the Q400 ("Quiet") turboprop. They should probably drop the Challenger - Cessna Citation has them beat to shit marketing and support wise, and drop the Lear (sob) - the best small business jet - in it's day, which is long past.

Bombadier may be spread too thin, trying to do planes and trains under one management roof. If they can focus on what works - the CRJ and Q400, they may have the space to get the much delayed and over-budget C-series out the door. The Boeing Dreamliner had it's problems also, and Boeing stock didn't rock for a couple of years - i had (and still have) a bunch. And the Dreamliner (777) is still having problems with the lithium batteries and all, but it is working out. The Bombadier C-series will probably also work out, but management has got to cut their losses with the Challenger and Lear Jet divisions.

Yeah, I'm a pilot and follow this stuff - but the CRJ is a really good aircraft for a useful market, and the C series has real potential. This might be a case for taxpayer support, IF management gets their shit together, and in more than just the C Series program.

I still ain't gonna buy any of their stock...

Five8Charlie's picture

Dreamliner and 777 are not the same airplane.

Max Steel's picture

I love flying in boeing dreamliners.

Nobody For President's picture

Of course they ain't - fumble fingers. The Dreamliner is the 787, the Triple Seven is a bit larger and been around longer.

OK now?

Abbie Normal's picture

Maybe they're just old but the CRJs used by United Express are downright embarassing compared to the newer Embraer regional jets.  Hey Bombardier, planes with more than 60 seats should have at least two bathrooms including one at the front.

robertocarlos's picture

The Air Canada Embraer is a great jet. It seats more than 100 I think and there are two washrooms but the front one was for the 11 or 13 Business class people only.

hannah's picture

their can-am mx bikes in the 1970's kicked ass.....go marty tripes.

Omega_Man's picture

who will bail out Quebec?? Canadian taxpayers...

Bopper09's picture

We always have.  Look at the history between the 'provincial have and have not' program.  I'm in Sask, never been a 'have not'.  Or ever will.  The only province to pay down debt in the last 3 years (including Alberta)

Omega_Man's picture

Que has no money.... what a joke... give us helicopta monie ... argent 

Spungo's picture

In their Q2 earnings call, they said they expected about $300M of share dilution in the next year. I feel bad for the people holding stock in that company. Also, enterprise value is 3x as large as market cap. That's always a sign of a clean balance sheet. /s

https://finance.yahoo.com/q/ks?s=BBD-B.TO

Northern Lights's picture

This explains the holdup on the 67 brand new streetcars Bombardier was commissioned to build for the City Of Toronto.

Of those 67, only 16 were delivered, and they've been breaking down a lot.

They are without a doubt, a shit company.  The equivalent of GM that should have gone out of business years ago.

By the way, Quebec taxpayers won't be covering this.  It will be the rest of Canada.  Quebec is a welfare province with no money and high unemployment.  There's no one left outside the city of Montreal that pay any significant taxes to cover that bailout.

 

 

 

MASTER OF UNIVERSE's picture

Corporate Welfare whoredom, eh, Bum-bardier Inc.

 

Stick that up your Bill 101, Quebec.

JailBanksters's picture

The true meaning of Capitalism....

Privatise the Profits, Socialise the Losses

 

The true meaning of Socialism....

Socialise the Profits, Privatise the losses

 

Bopper09's picture

Funny, not in that way, but having a conversation last night with my coworker.  Not quite unplugged yet.  This 'gov't' bailout is nothing new here, we've bailed out CBC annually (because we NEED them), AirCanada, government business, um, not much more than that, but alot of bailouts for whoever knows the gov't.  And as stupid as I sound knowing more about American politics, it's just that our locals serve U.S. and British masters.  Look at our fake paper 'money'.

Proof reading this I don't make much sense.  I know there's a reason though, like making toboganning illegal in Hamilton.

squid's picture

Ok....there are 10 provinces in Canada.

Guess, just guess which one has the highest debt? You pick the ratio, it doesn't really matter, that province leads them all....

 

Ok, go on, guess, just take a guess.

 

Squid

rockface's picture

This is what governments call investment.