According to the news report by Reuters, the top executives of Bombardier Inc. met with the company’s investors on Friday in Montreal after the company gave a disappointing forecast for free cash flow as well as regulatory action.
According to people familiar with this matter, this is what led the airplane and train manufacturer’s shares tumbling 20%. According to these sources, this meeting between investors and Chief Executive Officer Alain Bellemare and Chief Financial Officer John Di Bert had been previously scheduled, however, the high levels of participation and interest were triggered by recent events.
CEO Alain Bellemare had already met with investors after the company had made its forecast about its free cash flow situation on November 8. This led to the company’s stocks dropping by 23%.
In the meeting Bellemare stated that the company would only be able to meet its free cash flow targets for 2018 if it used the proceeds from the sale of a plant in Toronto (made earlier in the year), which amounted to $635 million. The market expectation had been that the company would be able to reach its free cash flow target without having to use those funds.
Since the crippling cash crunch the company faced in 2015, Bellemare has been credited with improving Bombardier’s financial situation. This week, Bellemare sought to pacify worried investors that the company would still be able to meet its 5-year turnaround target of boosting revenues as well as margins by the year 2020.
The source declined to be identified as this information is still private and confidential. When contacted for confirmation, a Bombardier spokesperson declined to comment on the company’s current situation.
On Thursday this week, Quebec’s securities regulator ordered Bombardier to stop trades under a plan that had been set up to help the sale of shares by some of the company’s top executives.
On August 15, the AMF (Autorite des Marches Financiers) stated that it was assessing transactions as well as various other announcements that were linked to the company’s creation of its Automatic Securities Disposition Plan. Bombardier stated that it was cooperating with the agency in its investigation.
The company’s stocks closed trading down by 20% at C$1.67 per share. The week before, the company lost a massive 31% in the stock market, taking the total losses suffered by the company to 58% since October 16.
The sell-off in the stock market spread to the company’s bonds also. The company has around C$12.3 billion (~US$9.35 billion) of outstanding bonds. Based on data from Refinitiv Eikon, most of these bonds have been issued in US dollars.
Bombardier’s 7.5% US Dollar Bonds that are maturing in March 2019 have seen a massive jump in yields, which have gone up nearly 300 basis points in the last two weeks to trade at 9.87%. This is the highest the bonds have gone since July of 2016.
The Montreal Gazette reported that the economic minister of Quebec, Pierre Fitzgibbon met with Bellemare on Friday after Bombardier announced that it would laying off 5,000 workers across the company over the next 12 to 18 months. Of these, about half would be from Quebec.
Also on Friday, the head of the union that represents the Bombardier workers based in Montreal, David Chartrand, published an open letter, asking the government to intervene. He stated that the government needed to be involved so that interests of Quebec and workers in the aerospace division.
Fitzgibbon stated that Quebec government wanted to talk to Bombardier so that all surprises could be avoided. He said that he wanted to be available to help Bombardier or at least participate in the solution that was required.